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I 


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derniAre  page  qui  comporte  une  empreinte 
d'impression  ou  d'illustration.  soit  par  le  second 
plat,  selon  le  cas.  Tous  les  autres  exemplaires 
originaux  sont  film*s  en  commenpant  par  la 
prsmiAre  page  qui  compone  une  empreinte 
d'impression  ou  d'illustration  et  en  terminant  par 
la  derniire  page  qui  comporte  une  telle 
empreinte. 

Un  des  symboles  suivants  spparaitra  sur  la 
dernidre  image  de  chaque  microfiche,  selon  le 
cas:  le  symbole  — •-  signifia  "A  SUIVRE ".  le 
symbole  V  signifie   "FIN". 

Les  cartes,  planches,  tableaux,  etc.  peuvent  etre 
filmis  i  des  taux  de  reduction  diff^rents. 
Lorsque  le  document  est  trop  grand  pour  etre 
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de  Tangle  sup^rieur  gauche,  de  gauche  ^  droite. 
et  de  haul  en  bas.  en  prenant  le  nombre 
d'images  nicessaire.  Les  diagrammes  suivants 
illustrent  la  mdthode. 


MICROCOPY     RESOtUIION    TEST    CHART 
ANSI  end  ISO  TEST  CMARt  No   2 


1.0    *-«-  i 


I.I 


^    111= 

r  |||||z£ 
mil  1.8 


1.25 


1.4 


1.6 


-:=       .-IPPLiED    INA^GE      Inc 


ISiOK  M  fCOSQMKS  AHi>  WStM* 


«> » 


X  iCOSOil'e  STOBIES  OF  THE  WAR 


THE  FlH^«a>M,  HIS1£MEY;^<^ 


:: 

iB**'*i;"- 

^ 

1 

.  .  .-.■.•J 

* 

■BH 

:::::t 

^^^B^^. 

Carnegie  Endowment  for  International  Peace 


DIVISION  OF  ECONOMICS  AND  HISTORY 

lOHN    BATES   CLARK,    L'IRECTOR 


PRELIMINARY  ECONOMIC   STIDIES   OF  THE   WAR 


fcDlThlJ  BY 


DAVID    KINLFY 


Prolciior  of  Political  Econ'imy    IJiiivrrtity  of  IIlinot« 
Nicmbcr  ol  Committee  of  Reicarch  of  ihr  Endowment 


No.   7 


THE   FINANCIAL   HISTORY  OF  GREAT 
BRITAIN,   1914-1918 


BY 


FRANK    I.    McVKY 

Prc>ii(ent,  Univeijit'   of  Kfiitucky 


NFW   ',ORK 

OXFORD  INIVFRSITY  PRESS 

AMKKICAN   |;K\N(  II      :-,  Wur  jjnd  Strfrt 
LONDON.  TOK(JM(J.  M  M.liOURNE.  AND  BOMBAY 
1918 


I  i.ll'VMi.llT  V.' 


CARM-.l.n.   r.NIMiWMl  Nl    liiK    I  M  K  I;  N  A  I  Ii  iN.M-  I't-AcE 

J     JaiKSI    N      I'lAlf.     \\   AllilNi.U   V.     1-      ^ 


EDITORS   PREFACE 


President  McW-v'^  -tuily  i-  .>iu'  ^ii  the  -(.'rie^  ..f  prcliinuiary 
\' ar  -tu<lii'-  plaiiiuil  li\  ihc  (  ariui,'K'  Imii1(  iw  nu-iil  i'-r  liiti-r- 
nati'aial  I 'cact'  to  a^-^i^t  in  -Ii'iajiil;  "ur  "^sn  [ici'jilc  -  hk'  hi'  tin- 
earl\-  c-\]iiTifiici--.  ]inlicu"~.  ami  I'ltict-  m|'  ilu'  'Aar.  It  ^ct^  lorlli 
tlif  tinaiicia!  t'\iK.Tii.'ncf  "f  ( ircMt  Untaui  I'r'.m  the  Ix^'i^MiuiinL;  nf 
the  war  to  the  -|iniii;  <>\  I'-'I-^.  Tlu-  attciitMii  oi'  the  ■-tudiiit  ut 
llriti'-li  ellnrts  ami  cxpcrieiui'  will  l>f  arrc-inl  at  once  liy  >f\fral 
iiiiportaiit  p'iiiit>  in  the  ^tory.  I  U'  will  In-  struck  tirst  with  th.c 
iiiinit.'ii<ity  of  till.'  htirdcn  which  the  llriti^h  people  ha\e  volun- 
tarils  a.->inneil  m  (ieieii>e  ot  their  empire,  their  nleaK  and  their 
international  obligations,  if  hefore  the  war  an\one  had  ]irophe- 
>ied  that  even  ^o  wealtln  a  peojjle  a'^  the  I'ritish  could  or  would 
'-uhmit  to  war  expenditure^  on  so  -tupendous  a  sc.ile,  lie  \\.  uld 
h;i\e  lieen  laughed  at.  .\  second  point  tliat  \Nill  iinjjre-^  it-ili  i> 
that  in  spite  of  the  ari^uinent.^  of  lllock  and  writer>  of  his  jchool, 
the  inountin.t,^  expen-e  of  modern  war  is  not,  after  all,  a  very 
stroiiL;  or  ])rimar\  deterrent  of  conflict.  The  third  point  which 
will  arrest  attention  :s  the  t'mancial  streii.Ljth  and  resourcefulness 
(if  the  lintish  Kmpire.  Her  far-tlung  battle  line  is  paralleled 
by  her  far-tUin<;;  commercial  and  linancial  line  of  intluence  and 
[lower.  As  her  children  have  gathered  from  all  (piarter.-^  of  the 
world  to  her  defense  m  battle,  so  her  tinancial  resciurces  have 
come  from  e(iually  diverse  and  distant  cpiarters  to  support  them. 
Without  her  forei^m  investments  to  draw  on  Britain  would 
undoubtedly  h.ave  been  seriously  crippled  i.efore  this.  Still 
aj^Min,  one  uill  be  -truck  with  the  fact  that  this  burden  of  taxa- 
tion has  been  borne  cheerfully,  in  accordance  with  the  determina- 
tion of  the  people  and  their  ^^overnment  to  pursue  their  purpose 
in  the  war  to  a  conclusion. 

Of  Course,  much  of  the  I'ritish  financial  strentrth  has  come 
from  the  L'nited  States.      I'his  was  true  even  U'fore  we  were 

lii 


,     ,    ,!-....,••      h  1,  tii-rr  so  now  )H.'cau-e  "I  the 

.  nri,i.h  war  .ma.cial  ,...l-cv  .n  the  uh„!c  has   >een  sound 

,,.,.„.  the  p. .Hit  ..1  MO%      ■  l.alaiKc. 

taxatini,  t^^  the  limit   and  have  Micd  -n  l-.ui^   i    r  u. 
■         nt.lv.u.aivhkclvt.   ,,4l.,uth..^^^^^^^ 
r,tlK...u.aUv.hu-h..ha..uia,l.,t,.urpr.v,....^^^^ 
,.U...nnanvap,.ar....ha..n,ad.nit:u^ua,,,,    trn^ 

,.„„.        r,,,  ,,n.r  ,„au-y  .tinuilatv^  .,K-culatu,n    LrecN  n.u  u  h 
i:..aucahhl,v.ua!an,,^...t.t.,he.,nter.cha,  thecxpn.. 

..fthc  countrv  thn  u,h  .akin,  a.lvattta.c  of  U.  war  nvcoMtic. 
,,„,,  ,-„,alU.thrMU~ananauH.nr.l.nu,...ntla.  titnre. 

p,,.,,,i,01cVcv^  s,u,ly  1.  a  cU-ar  an.l  intcroMin,  cshiUt  M 

,,,,,,,,,,,,  .trctiuth  ,,f  our  .rcat  alU  an.l  rcvcal-m  part  t^ 
great  sacrh.c>^h.ha~uuul.n,  the  war.  It  th.  .s  Oi.ht.  tn„.  „u 
the  va>tiK'SS  ni  the  lair-leii  ue 


,urM;Ke^  -hall  liave  t-  carr;. . 

1  )\\  in   KiM.i;v 


;  'ni:yr.<ily  of  llimois. 


CONTENTS 


I             Im.iK'ilKitt   |-;ii;mci:il  nit'tuT.ltic- •> 

Aililni'tial  l'.!iHT;^(.-nr\    Mcii-iirc-  ''' 
llu'  War  lUi.l-rt^ 

\  ntc--  "f  ( 'rcdii  aii'i  i!u-  C'-i  "t  the  W.tr  •'"•' 

War  I.i -ail--  ami  l-'iiiain-iil  1  )(.vi(.'i.'^  '■' 

!•'.  irci.Lrn   !■  xclian-f  ami  ilu'   Dollar  Security   Srlniiu'  ''I 

\n        The  i'lr-^li^li    ra\ati-ii  I'mIk-v 

\ni      IntliUinn  ai!(l  <  nluT  War  I  ■•M-  ■>'• 

1\         ScaniiiiiL'  ilu'  I'lmirf                ^'* 


[I 

111 
W 
V 

\  1 


i 


i 


THE    FINANCIAL   HISTORY 

OF  GREAT   BRITAIN, 

1914— litis 


i 

4 


CHAPTER  I 

Immediate  Financial  Difficulties 

The  comment  of  periodicals,  newspapers,  and  publicist^  in  July, 
r.il  !,  -liiiws  that  the  war  was  a  surjiri^e  to  the  hanker,  the  caj)!- 
tali>t,  tile  pdhtician,  and  ihe  man  in  tlie  street,  'i'hat  it  >hnuld 
have  heen  m',  in  ht,dn  of  all  the  l'act>.  will  alw;i\s  he  a  mne  days' 
wiinder  to  the  student  of  hi-tnry.  h'^r  i^rty  year-  (iermany  had 
heen  preparing,'  for  "the  dav  "  hehind  her  -cree!i  "i  lanijua^e. 
intrii^ue,  and  commercial  policy.  The  two  IJalkan  Wars  had 
.added  nviterially  to  the  ])ri 'lial)ilit\  of  trouhle  and  \\h\  tiie  states- 
men of  Iuir(jpe  had  not  anticipated  the  ditiiculty  leaves  a  (iue-.tion 
lunjj:  tu  be  unanswered. 


I 


TnK  Hf(,in.\'inc.  ok  Tin-:  War 

On  Fridav.  Julv  --t.  .\iistria  setit  it-  ultimatum  to  Serbia,  which 
was  followed  bv  a  declaration  of  war  against  Serbia  on  J  ily  I'T. 
The  (ierman  ultimatum  to  Russia  followed  on  the  :>lst.  On 
Aus^ust  i',  fierniany  viokited  the  neutrality  of  I.u\embur<^;  on  the 
;U1.  her  troops  entered  l'eli,'ium;  and  on  Tuesday,  the  4th  of 
August,  r.'l },  luigland  joined  Ku>-ia  and  France  at  war  with  the 
Prussian  Power.  Thi>  -imple  statement  of  the  facts  is  merely 
introductory  to  the  momentous  events  that  en-ued.  There  fol- 
lowed a  series  of  incidents,  acts,  and  declarations  that  modihed, 
overturned,  and  de-troyed  commerce,  business,  .and  institutioii-, 
to  sav  nothing  of  the  lives,  wealth  and  happiness  of  peoj)le  in  a 
dozen  land-;  and  then  upon  <  ireat  I'lritain  .as  the  chief  state  of  the 
.Mlied  Powers  there  fell  enormous  l)urdens  of  diplomacy,  finance, 
and  military  and  moral  preparedness. 

3 


IIIK    IIN.WCIAI.    IIISTMKV    nr    CKKAT    lilUTAI.N 


I'm-.  I'l.AN  i>r  Disrr.— itiN 

l.niadly  -pcakiiij;,  >"  tar  as  this  Iniok  deak  wi 

iiiHTcial  ami  liusiiicss  tmancc, 
the  lU'ccssary  funds  to 


lu'^f  linrdflls     |,»---'"ii\'   ^twiL-itiir    ..,1   rrir  ;is  iiii^   iMMir\  (HjaiS  Wlttl 

thfin,  wcrt'  "i  lu'i  kiiK 
and  tlic  other,  the  .^reat  tasl,  mi  pp.ividini. 
meet  tlic  ex]ifiises  ni  the  war.  d'he  first  ,i;PiU])  oi  pnihlcins.  tliose 
,.t  ci-inniLTCial  adjUstmciits,  were  jirrcipitatcil  ui.cii  the  ^'uvern- 
iiieiit;  hrsnies.  wa.s  demorahxed  and  in  t!ie  end  tlie  rai>ni,L;  of 
funds,  either  hv  taxatmn  nr  hv  h^rr-win.^,  depended  up. in  the 
CMUtinuance  ■>{  husiness  under  as  n..nnal  eonchtmns  as  the  cir- 

'I'lie  situati'in  was  nnn-uah  and  unusual 


irder  i ml  ni  the  clians. 


Thi- 


cuiu~tance-  warranted. 

nietlii'd>  \sere  necessary  tn  hrin,!.; 

and  the   f.-lK Avin.i;  cliapter  deal   with   the   'ei^islati.in  enacted  to 

reinedv  tlie  situatini!.      Succeeding  them  the  discussi,,n  proceeds 

n_,  the  c'^isideration  '<i  the  prohlenis  of  puhlic  finance  raised  by 

the  uar. 

.Xdhereiice  u<  jjuhl-ic  finance  in  the  strict  sciise  of  the  term 
would  c  nfme  this  discusMon  1. 1  taxati.'n  and  puiilic  horrnu  m.^. 
■["hese  in  theniselve-  are  sut'ficient  l^r  .i  volume  much  lar-er  than 
this  niie,  hut  the  real  -enius  ui  the  h'.n^dish  (.. .\ eminent  to  meet 
situations  w -uld  he  pa-ed  hy  ii  die  earlier  einer-ency  lejj;islatuin 
were  cimiited  frmn  cousideratiMii.  These  pn.blems  are  m  a 
measure  iv  t  luihlic  tinance,  yet  the  war  practically  made  them  so 
hv  enlaruin,^^  the  field  of  u, ,vernment  fma.ncial  niierati.'ii.  in 
eonseciuence,  the  tir-t  twu  chapters  are  devoted  tM  the  hnancial 
ditficulties  ui  August,  September.  October  and  Xovember,  I'.Ud. 
As  the  budi-et  is  the  device  by  which  the  baij^lish  inau.uurate  their 
expenditures  it  ajiiiears  desirable  to  di-cuss  the  nature  of  the 
budt;et  .and  the  extent  nf  exjienditures  in  c;irr\  ini;  ( m  the  war. 
The  cust  ..f  the  war  i-  cl'i-ely  asMiciated  with  the  various  grants. 
VMte-  cf  credii.  and  from  this  the  discu-sinn  naturally  pro- 
ar  loans  and  jjlaus  ..f  tax.iti.m.     The  ibTar  security 

■aim  I  if  public  tinance,  but  the 
in   the  case  of  the 


or 

ceeds  1. 1  w, 

scheme  ajipears  tn  be  uut  ni  the  rea 

iiecessU'.    if   maint.amini;  exclian,i.;e  became,   n 

L'nited  lxini;dom.  a  questinn  of  public  tinance.  a  matter  of  vital 

importance  tu  the  scheme  of  war  linance.     The  same  i^  true  of 


IMMKIUATK     ll.N.sNtlAL    KllFIC  T  L  r  I  I'.S  •• 

intlatii'ii  ami  the  i)rK-e  ni  cninnitnlitie-.  With  thi~  uiTil  "i 
explanati  -n  tlic  plan  mI  prL'-cntati'in  may  he  laul  i1"\mi  in  .aitlnic 
fi^rni. 

I.  lu-ncfi^oncx   lei^i^latiim  ari^in.i;  nut  "t  the  nalinnal  cri.-<i.s 

1.  TIk-  nmratiiriuin 

J.  <  urrency  and  hank  n' 'to 

;>.  The  >t(ick  (.■.Nchan;^^  ^ltuati'lIl 

4.  Cmirts  i-'.mtr^encv  Act 

"i.  Shi^ipini:  in'-urance 

II.  Public  finance  prill )lc'nis 

1.  The  huil^ct 

■2.  X'dtes  ct  credit  and  the  war  cost 

:;.  War  loans  and  dollar  ^ecuritie-; 

4.  Taxation 

III.  Some  tinancial  elTects  nf  the  war 

1.     Trices  and  intlatinn 

j.    On  (ir.i;anizati(in  and  acc'iuntinjj 

:;.    Trade  and  <,'(ivernment  p<ilicv 

In  order  to  Ti-w  what  hapjieiied  t^  the  I'n-lidi  business  wnrUl 
when  war  was  declared,  it  i-  de:-iral>le  to  describe  brieily  -,  nie  of 
the  economic  c.^nditious  existin.i;  before;  AuL;ust,  I'.'l  1. 

FiNAXCiAL  Axr>  P-rsiNF.ss  CoNnrnoNs  Prior  to  rnr.  War 

Financial  matters  had  !.-one  from  hot  to  cold  and  back  t.)  hot 
in  the  .operations  that  were  bein^  nndertaken  prior  t^  the  vear 
r.Hl.  l-Ji^land  had  developed  an  enormous  exiKUisinn  ni  mter- 
nati.'nal  trade  with  the  oinseMiuent  increase  in  b,,  kin- operations ; 
a  yreat  i1o,.d  of  new  enterpri.ses  had  been  brou.uht  to  the  attention 
of  the  tinancial  world;  ]mblic  borrowin.q;  lia.l  ,^rown  to  huL,^' 
proportions  and  at  the  same  time  investors  sultered  heavy 
losses   through   bad   management,    deiaulting   states,    wars   and 

penal  taxation.' 

Durim,'  the  first  six  months  of  P.'l  4  the  political  lio-rizon  which 
had  been  long  o.h^cured  appeared  to  have  cleared  and  m.'ney, 

'  La\v-on  :  Britis'i  H'jr  I'inaiicc.  l'.'14-l-'>,  p.  22. 


C  Tin:    MXANCIAL    HIsTdRY    tiF   GKICAT    I'.KITAIM 

iiuicli  I'nu'litciu'il  li\  tlif  I'.alkin  W  .ir^  and  fear-  d  "tlicr  ctunpli- 
(aii"ii-.  a^Miii  circulaleil  with  lui 'fc  frccil'-iii.  TIictl'  was  an  iin- 
jir^vfii  tunc  in  tlu-  -(.■curity  market-'  and  it  wa>  liupcd  that  the 
i-\ck-  ''i  di'])riTiat)nL^  \cars  \\a-  at  an  end.' 

XfviTthck'--,  the  genera!  rmancia!  Ciinditiun-  in  Jnl>',  H'14, 
were  un^ati~iact( 'r\ .  The  Irencli  hanking  li(iuse<  involved  in 
tile  I'.alkan  War-  Iiad  little  I'ree  in^'iiey  fi .r  linancin.i;.  'I'hey  were 
in  tact  eiiua'^ed  in  acciumilatin^  ,t;"!d.  A  iieavy  indei-tedness 
alir'iad  jjrevented  Xew  ^ 'irk  frmn  acc< 'nipli-liiim  niuch  in  the 
\sa\  mi'  a--i-taiice.  which,  under  ni.nnal  time-,  wnuld  ha\e  keen 
-iveii  li\  i're<|nent  remittance-  ch,iri;ed  a.i^ainst  expMrt^  ''i  ;;rain. 
i  he  i'ari-  lianl<er-  were  -elliiiL;  American  secnritie-  in  nrder  to 
stienL;tlien  their  j^-'  Id  hdldin.i,'-."  Ihit  it  wa-  ii' 4  niitil  Jnly  -7. 
that  the  l.<indnn  money  market  liei,'aii  tn  adi)])t  mean-  tc  pr.itect 
it-  iiitere.-t-.  Mni'i-t  at  >  ince  market  (iii'itatinn  nn  mercantile 
])aiier  went  1  per  cent  .aluAe  the  liank  rate.  I'ari-  exchatii^'e  fell 
to  L'.'if.  "ic,  and  New  ^^lrk  e\chan,i;e  r^-se  tn  Sl.'»''i.  Lmlil  was 
withdrawn  f(ir  -Inpmeiit  lu  i\i,'\pt  and  the  continent.  On  the 
■  \'nh  the  hank  rate  advaiice<l  from  :;  to  t  ])er  cent.  The  iiropor- 
tioti-  of  re-er\e  to  loans  in  the  hank  -tatemeiit  fell  to  M'  per  cent. 
I'lilk-  -old  to  the  hank  at  ti  pc.-  cent,  then  at  1"  per  cent.  On 
tile  -''l-t  the  .'sew  \'ork  ami  l.omlon  stock  exchange-  closed,  pre- 
ceded three  day,-  hefore  hy  the  e-\chanL;e-  in  \'ienna  and  I'aris. 

.XothiiiL,^  could  have  te-tilied  more  clearlv  to  the  impossi- 
i)iht\'  of  ninmiii;  modern  civilization  and  war  t<i,^ether  than 
this  clo>ill^  of  the  London  -tock  exchan<.je  produced  not  hy 
the  actn.il  outhrt'ak  of  ,a  -mall  war,  hut  hv  the  fear  uf  a  war 
hetweeii  -ome  of  the  ^reat  Towers  of  F.urope.' 


in: 


f MMKi)i.\Ti-:  Tasks 


The  immediate  hurden  laid  ujioii  (Ireat  Britain  a-^  a  conse- 
c|ueiice  <if  the  w.ir  wa-  a  hea\  y  one.  Fho-e  of  military  im- 
portance were  to  kee]i  Command  of  the  sea,  to  place  an  army  in 

'  The  '!  iiiitS.  l-nniiiiii,  J:innar_\   --,  l!')-'. 

'  The  Times    History  of  th,-  /!  d'-.  \.'    i,  \\  171. 

'London  Econoiiiist,  .Vugii^t  1.  l''li,  ;,.  21'.i. 


IMMI.DIATK    I  l.VANlIAL    P!  1- KR-L  LT I KS  7 

the  fiel'l.  and  Im  a^-i-t  licr  alhc-  liy  furni-hin-  -upplic-  an.i 
aidinL,^  thcni  t'l  I'mam-c-  purcha-c^  in  cuntric-  >  itluT  than  ilicir 
(jun.  I  he  linaiu-ial  iir.'hlfin-  uvrv  !i(.])ole--l>  inixfil  ami  i\nw- 
taiU'd.  ri'c  (.■C'ln^iiiiic  liiacliuiiTx  wa-  thrnun  "tit  >>i  i;car,  and 
the  mechanics  >>i  Iniyin.L,'  and  >elhn-,  t<i  tr;',n>i)Mrtin.!,',  "t  hankin^; 
and  finance  stupped  like  an  nnw'iund  cluck.  1"  ;:et  it  t^'  ,i,">  was 
the  ])r(Meni.  It  ua>  necessary  t..  pr. .tect  hill-  "i  exchant^'e  in 
circulati'in  and  InaturinJ,^  to  provide  -aiety  l^r  --t'lck  exchan.L;e 
transactions  and  t.i  •~inootli  out  the  ditVicultie>  <>i  d(iine--tic  trade. 
With  ciiura.i,fe  and  deci'-inn  the  j^overnnient  t. "  ,k  np  the  task.' 
Th.c  tjr"!i'erns  ■^riaped  theinvdve-  nito  the  immediate  one-  ot  m.ik- 
inu  ever\  dav  credit  a  .t^oin-  force,  relieving;  pressure  on  markets 
and  tniance  and  keepin-'  shijis  niovini;-  even  in  the  t.ice  of  ^reat 
risks. 

dhe  method  and  niachnier\  of  tlie  ,var  lei^i-Ialion  \\a-  of 
the  i)rofoundest  constitutional  importance.  Such  le,i;isIation 
in  the  l-di/ahethan  aj;e  had  heen  cliieiix  etfected  hv  tlu_  (jueen 
111  (,  o.unci!.  in  'he  a,i;e  of  i'itt  hv  tlie  Kini:  in  I'.irhaiiient.  In 
thi-  as  in  all  other  ni.itter-,  tlie  eari\  decade-  ot  the  twen- 
tieth century  were  an  eclectic  a.L^e.  .<tate-nieii  ran-acked  the 
record-  for  new  methods  of  le,;,M-latioii.  Tiiere  ua-  liavdlv 
a  po-sihle  form  of  le^dslative  activitv  to  wliicli  the  LToveni- 
ment  of  dreat  P.ritain  had  not  to  resort  in  order  r:it)idlv  to 
create  an  economic  screen  hetweeii  the  nation  and  tlie  war 
/one  and  at  the  same  time  to  carrv  on  the  ,i;reat  war  with 
elViciencv.  Succe--  in  the  held  and  ou  tlie  sea  was  not  alone 
necessarv.  It  was  e(|ually  nece-sarv  to  preserve  national  life 
immune  from  social  and  economic  dislocation." 

TlIF.   n.\NK.-   AX!)  Bil.I..-  "F   F.X(   H.\Nr,K 

The  po-ition  in  which  Creat  P.ritain  f.  uiid  hersrlf  on  the  kist 
dav  of  July  was  without  parallel,  d'he  I'-ank  Ihilidavs  were  at 
liaiid  and  the  whole  po].ulace  was  callini,'  for  fund-  to  finance 
it-  eNjieilition-  into  the  country.  The  joint  stock  hank-  hei^an 
pavinir  in   notes  and   refu-in<^'  L:old,    forcin.s,'-  upon   the    I'.ank   of 

'  Str  -I'ocli  -f  l.!o>d  (ioiri;v  ami  il.batc.  !'itr:ninu-ntjry  !>c!\i:es.  H.  C, 
Xovinihcr  -7.   I^'l  t. 

-'  Thr  Tiiiu-s  IHsto'x  r-j  ;lu    W  ar.  \  .1,  vi.  \,   V-K 


s  IHi;    IINAN'  I  \I-    ^I^^^UY    nl-    r,ui:.\T    IU<ir\IN 

l.-„^lan.l  the  Inir.Kn  -i  'A'  M  \nynwux  in  c-xchau-c  t..r  ihc  notes 
secnn-l  ir.^m  tliu  Lank-,  In  v.cu  ni  tiic  hanlciimj.^  nt  h-iuul 
assets  maiulv  in  i!k-  l  nn  m|  l.ill-  mi  cx'-han.ue  an<l  >ecuritie>  hcM 
hy  baiik^.  tliU  wa^  iMt  uiuspcctcMl.  In  the  week  cn.hii.i;  July  :;h, 
cnns,.K  iia.l  t-allui  ir-ni  7.->  t..  hfl-u  7"  aii.l  the  .-.-T  -cairitic^ 
li.lol  m  the  naiih.rs'  M ';/a;iur  tell  an  average  -t"  .'■.'•>:  ni  the 
n-,,  ,lav^  tn^ni  .lnl>    -J"  t-  :'.".      1  he  ^tnck  cxdiau.^c  ua>  a'   the 

..j„H'  time  tl led  hv  ^ecuntie-  tn-ni  the  eniuinent  and  u>  c  m- 

tinuance  meant  .leehne  -t  va'ne^  a^  uell  a^  further  call^  in.m 
the  hank^  t^r  -reater  mar-in^  uii  their  l-an^.  1  lie  el  -m-  <■! 
the  exdian-e  ma<le  -eeuntie^  un^alahle  and  i>-/e  the  hank> 
collateral-  a--  li(imd  a---et-<. 

An-iher  a--ei  held  hv  the  hank-  \va^  the  hill-  "i  exchan-e 
ari-m-  tr.ni  the  ediidncl  .'i  mternaimnal  trade.  In  nnlinary 
time- "these  uere  re-arded  highly  a-  lir-t  ela-  a-et-.  The 
exchaiii;e  -N>iem  havin-;  hruken  .Imu-,,  fnrei.^n  dehl-r-  uere  un- 
ahle  t-  remit  to  i:n,-land/  Sucli  a  onditi-n  p-inted  to  the 
neee-itv  oi  the  ^^reat  prnate  accejuin-  hou-e>  meeting  the  lulls 
thev  h.ad  accepted  iroin  their  oun  a-et-.  The  hanks'  a^5Cts 
uere  lar-elv  unreali/ahle  and  tho-c  ot  the  acceptin-  hou-e-  pretts 
much  m  the  same  predicament.  The  hanker>  therefore  found 
th.em.-elve-  witli  sseakened  a-et>  un  (Uie  hand  and  a  rapidly  Kf-w- 
m.LT  demand  tor  money  and  a  possible  call  upon  them  to  pay  the 
bilks  uf  exchange  held  by  them  on  the  other. 

ll>  mean-  of  bills  of  e-xchani,'e  drawn  upon  London.  t;rain, 
mamifactured  -ooiL.  metal-,  coal,  oil,  rubber  and  other 
article-  recimi.d  bv  civilized  and  uncivilizeil  man.  are  ear- 
ned o\  :r  the  -e\en  -eas  to  their  ultimate  destination  and  to 
the  linal  con-imier.  N"o\v,  the  -ellers  of  the-e  goods  can  n=)t, 
a-  a  rule,  wait  for  the  monev  due  them  until  dealer>  hnally 
realize  upon  their  purcha-es.  The  i,ondon  mcnicy  market— 
ihai  1-  the  bank-,  tiie  bill  broker-  and  the  acceptance  houses 
—  provide-  the  capital  nece--arv  to  carrv  on  this  vast  inter- 
national tra.le.  In  other  word-,  bombard  .street  bnvs  anu 
sell-  bill.-  of  exch;m,ue,  throui:h  which  and  b\  mean-  ot 
ahich    foreiirn  trade  is  carried  on. 


IM  Mr.i>i.\ri;   iinam  i  \i.   uii- 1  u  i  i.riKS 


Lniiii  '11  iia-  iiiaiif  .1   -pri"i;ilt\   "\   iiUci  ii.itu 'ii.il  Mil--  "1   r\- 
ciiaiiuf  .111(1  tln'-i'  !iil!>  art-  ri'^arilcil  a-  '^""d  a--  .i,'<il<l  in  rvcrx 
i|iiarR'r  nt  tin-  unrld.     (uTiii.ui.  Au-tnaii,  l\u--ian.  l-"ti-iu-h. 
anil  "iluT  (lf;'.!iT<,  .'rranijc  witli  I-iniil-iu  acc(.'pti".^  li"U-i-'-  Im 
aici.'pt  tlu'  hilK  that  ari-  to  pa\   for  i^unds  l)..iit,'ht  in  (.•'luiitrii'- 
all  tlic  uav  tr'itn  riima  t"  I'lTii.      \'"r  exaniplr.  a  llainluiri: 
mercliaiit  l>iuiii;,'  ctton  irnin    l^'xa--.  or  cottci-  troin  I'.ra/il. 
or  wheat  from  Arj^eiituio.  or -ilk  from  I'hiiia,  or  opium  fr-m 
India,  or  cocoamit  oil  from  the  South  Sea  UlamK,  or  o>;ricli 
feathers   from  South  Africa,  arran;^e>  with  an   i-'ii'^^li-li  ac- 
ceptance house  to  accept   the  draft-   uliich  are  to  pa\    tor 
the-e  commodities.       The   haiL^li-li  acceptance  h m-e.   uliile 
accepiin.L:   tlie   draft    for   the    llamhiir;;   nn-rchant.   and    thus 
hecoininj,'   liable    fo.r   it>   pavmeiit.    require-   him    to    -i^n    a 
certificate  j^'uaraiiteein^  that.  thn>Ui;h  lii-  JKUiker.  or  i_;her- 
wi-e,  he  will  put  the  acceptance  hou-e  in  pos-e-si(.n  oi   funds 
-hortlv  before  the  hill  i-  due.  i;enerall\  three  d;u  -  before  it 
matures.      In  the  meantime  tlie  I'.r.azilian  or  other  -eller  oi 
the  <:no(ls  ^et>  ;i   tir-t-cla--   tinancial  document.  i,'uar;uiteed 
by  a  stronc;  tinanci.al  l-".n^li-h  in-titution.     'idiese  bill-,  which. 
as  a  rule,  run  for  ;i  ]ieriod  of  three  months,  can  be  immedi- 
atelv   di-counted    by    the    e\po-ter.    who    th.u-    receives    hi- 
iiKMiev  at  once.     On  the  other  hand,  the  llanibur-  importer 
^et-  pos<e-sion  of  the  L;oods  as  he  -i,i;;n-  tlie  ccrtit'icate  liWdV- 
anteeinsj  to  put  the  I".n<:1i-h  acceptance  hou<e  in  posses-ion  of 
funds  to  meet  the  draft  when  it  bec.ime-  due.      llavint:  -e- 
cured  the  ijoods.  he  either  -ell-  them,  or  manufacture-  them 
into  t'ini4ied  product:  and  bef<ire  the  three  months"  jieriod  is 
up.  he  ha-  realized  a  -ufficient  -uni   from  the  s,-de-  he  has 
etYected  to  meet  his  oblip;ation<   in    London.     The   l'.n;.;Ii>h 
acceptance  house,  of  course,  receive-  a  commission  for  carrv- 
Wiz  out   it-;  -hare  in   -uch  transaction-.      I.oml  .n   levie-  an 
cni'rmous  toll  upon  the  commerce  of  the  world  which  tlows 
in  this  wav  tlirouijh  her  cjate-.' 

.As  a  conse(]uence  of  thi-  brief  -tafement  of  the  me.anincr  "f 
hill-  of  e\ch,-in-e  in  T-.n,uli-h  nnancial  hi-tory.  the  reader  will  be 
in  a  better  position  to  .-qiprcciatc  the  anxiety  of  banker-  and  of 
the  jjovcrnmcnt  to  maintain  th.eit  value  and  indvement  in  the 
stream  of  busine-s. 

The  banks  hc^an  callin,!:  on  the  bill  l>roker<  foi  the  payment  of 
'  W"    \V.  Swan. .Mi:  Tin-  Finjiu-lnl  f\'Z<rr  .•/  thr  Lnifve.  pp.  o-ii. 


10 


111.   I  I  ;■.  \  M 


lAl.    lIISTiiUV    <i\     (>Ri:\l     I'.MIMN 


the  1'  ;in-  iiia^lc  t -  them  "U  tlu'  cmlor-cr-  .-.n.!  .icccpuni;  c\chaii;;c- 

hills  a,  -....11  :i-  tlu-  uar  i:l.  .ikN  ajiiicircd.      In  turn,  tlu'  luMkrr^ 

wi-nt  t'.  the   l'..uik  .if  I'.n^^laii.l.      In  ifiinal  tiiiu'-  there  i-  al^ut 

£l(Mi  uih.  niHi  I.  .ine.l   in   LmilI-h  ..n   -hnrl    term   I  ill-,  lait   in   the 

ten  days,  cndin-   Au-u-t    !.   the   Hank  wi    iMi-laml  increased   it- 

1..ati-  V:'.1.7n(i,ti(»(i  '        Ihe   hank    r.ite    r^se    rapidly    fr. 'in    I    jier 

cent  ..n  ■ihiirsd.iN.  t -  -  i^er  eeiil  .  ii   I'riday,  and  t.>   1"  jier  ■■eni 

c.n    >aturda\,    Aui^iist    I.      Meantime   the  imlilie    u.a-   rutmnii.;   t.i 

the  hank-,  .and  -nice  llie  hank-   n  iiised  t. .  pav    i^mKI  t. .  their  cai- 

f.mers  the  pnhlic  t.-k  the  iL  te-  L,M\en  l-^  it  t..  the  Hank  -t   h.ii-- 

land  liir  excliaime  m  .t,'.'ld.      In  a  hriei  time  the  l'.,ink  -t"  I-.n-hmd 

In-t   tlt'..i'"">."""  in  n..te-  and  -..verei;^!!-  with  .a  re-t:!!ant    i.ill  in 

re-erve  t..  le--  tlian  £  jn.uoii.niin      d'he  -itn.itii.n  wa-  nmre  than 

^eri.'ii-.    11    l.-'ked    (li-a-lr..u-       In    prevn  n-    cri-i-.    the    ,L'"\ern- 

meiit  had  -ii-pende.l  the  I'-ank    \el  -i   1  "^  1  1  and  all-wed  the  Ikiiik 

..t    I-'.n.udand  u>  issue  n..te-.       Ihe  puhlic  h.'-an  t.  h.'.anl   m..nrv 

and  cdl  i'.  r  further  .iin..iinis.  hut  the  curreiicx   ua-  n.-t  at  han.l. 

Neither  the   I'.ank  ii-r  the  Trea-urv  had  .a    -ujiplv   readv    f.  .r  tiie 

emer:..;eiic< .       dhe  tir-t  nece-sitv   wa-  time  and  t.)   tin-  end  the 

Hank  Ih^lidavs  were  extended  h>   \u>,ui-t  •'.  by  royal  proclamati.  n. 


Tin:   MiiKArdRiiM 

In  his  spi-ech  in  tlie  ihiuse  of  (./..mmoUs  on  Xuvemher  iJ . , 
l<il!  1.1. .',d  ( ii'ori;.'  -;ii.l.  ■'We  iir-t  declared  a  m..rat. 'riuni.  a 
limited  111.  ral..rinm,  -. .  .a-  t.  ■  <.,Mve  Us  time  '■'  hnik  ar.  .und."  ' 
In  the  iiUerwil  hel-re  le-islati.  .n  could  he  enacted  a  r.ival  i)r..c- 
laniatioii  wa-  i-iu.i  under  date  of  \u.L;n-t  i',  authorizing;  the 
p.;-tp.  .nenieiu  of  cert.ain  hill-  of  exchange,'  On  the  foll.wnii: 
da\.  I'arhameiu  enacted  l\u  :'o-tp.  .iiement  of  raynieii'-  Act' 
and  Ie,i:ali-/ed  the  pr.  .clamaii.  .n.  (  hi  the  'ith  ..f  Au-u-i,  liic  C  r.r- 
reiicy  and   Dank   Xnte-  Act   wa-  p.a-ed '■  and  .u  Au.^u-t  :ll.  the 

'  Sec  disciK^ion,  WitluT-:   liar   rid  1.,'inhard  Street.  \<v.  :il-:>7. 

- /.,.H(f,^ii  o"<i:c;/.-.  .XuKu-t  t.  I-'H.  p.  i!(tti4. 

'  I'arliitmciitLiix  i),-lmtrs.  II.  i  ..  NoviuiIht  -..  1'14, 

'  /.<.»i</««  Gijscttc.  AuKusl  -.   l''l^.  P    «i*'-*" 

''  4  and  •">  (.kofKc  \'.  cliiip.  ii. 

'  I'lU  (4  and  •">  George  \). 


iMMi.i'ixu.   UNANiiM.   nil  1  uri.riKS  H 

('Murt>  l-nK'ij;inr\  1'.  wcr-  \. '.  I  lif-c  thrtt-  ;kI~  with  the  ac- 
CMmpaiuii'K  iir'n-'laniati'iii-.  ainl  I'.ank  iiR'iiiMiaiiil.i  c. -miin-o  tlu- 
tir-t  |)li:i-i'  I't  war  leui-lati^n  t'^r  liiiaiicial  inirii- i-rv  \\  liat  thr 
t  liaiicclli  r  .ii'  thf  |-.\c1k'(|irt  calk-il  a  liiiutcil  m. TatMrinm  ln\.iinc 
1)\  reaNMii  nj  ilu'  i\t(.-n-i. 'n>  ■'t  the  act--  a  ^'cucral  iiiiirat.  Tiuin 
ol"  far  reaohiiiL;  chaiaeicr. 

In-^i-tcnce  nj)"n  ijavnu-nt  li\  acceptors  nr  ;,'iiaraiiti t-^  in  vie.'  "t 
the  (leiiiMralizatLiii  •.!  exehan-e  tlie  wurld  over  umild  b.i^e 
l)r..u>,'ht  tlie  lioUM-  -f  car.U  CMnii)letely  to  the  >,'r..iiii(l.  A  ^v  ^teni 
l)ase(l  iiiiMii  jieac-  toiul;!:.  ii^  l>ecatiie  in  time  ot  war  a  iliin>v 
>trnctr,re.  likelv  h'  coHa])«e  \>\  nndue  i)re---ure  ir. -ni  any  .1  a 
dozen  \»  nit>.  'I'lu'  ])roviMon>  of  tlu-  nioratornan  and  the  allow- 
ance of  rea-oiialile  time  in  which  to  collect  the  deht-  dne  tlie 
accei>tinL;  hank  tended  t'  re-t-re  contidence.  It  \\a>  vital  to 
|-'.n'4l:ind'>  ,;;ood  name  ami  her  future  credit  that  thi>  -liould 
lie  done,  dhe  l.e,~t  a.^encv  f .  t  the  c.  iiiduct  of  thl•^  part  of  the 
plan  of  reC"n>truction  wa^  the  Hank  of  lui-laiid,  which,  hv 
reason  of  the  rapid  development  of  joint  stock  liankm.i;.  had  lost 
til  --ome  extent  it-  jironiinent  poMti..n  m  I'.iif^lish  linance.  I  nder 
the  condition-  existin.t,'  in  \u^ii-i  the  hank  immediately  emerged 
from  its  Comparative  s^  '  :i  and  t.'ok  a  leadiiii,'  part  in  re- 
esfahl'-lniiLr  credit,  ddie  a  ,iiih~hmenls  of  the  hank  were  maiu  . 
hut  spccil'icalh'  it  i  1  )  paid  o,  ,ld  for  notes  issued  hy  other  hanks. 
(  ■_' )  condncteil  the  issue  of  d're.asury  notes.  {'■'•)  carried  on  ex- 
tended reiliscountinu  operati'^is.  (  ti  casheil  notes  for  l'>el,t;ians. 
( .')  )  issued  hu.ije  w;ir  loans  an<l  as-isted  in  e  consultations  with 
the  hanker-  ,uid  '_;overnment.' 

I 'nder  the  provisions  of  the  ro-tponernent  of  I'ayments  Act 
and  its  extensions  h\  proclamation,  the  prohlems  of  exch.aiiL^e.  the 
restoration  o,f  the  stock  e.\chanL;e  and  the  jjostjionement  of  deht 
pavments  were  arran.i^ed,  and  provided  for. 

1-1  restoi-ini,^  exchani;e  two  alternatives  were  open  to  the  jjov- 
ernment.-'     CJne  was  for  the  state  tu  hecome  the  hanker  and  to 


'  Th,-  Tivics.  January  -'^i.  H'l:.. 

=  I.lnyd  Cicor^f  in  speech  uf   X.jvtnibcr  -.,  I\lrli^Jmt■ntar;.  iJebatfi    11,  t- 
XuvLtiiUr  -'7,   li'lJ. 


IJ 


I  hi:    FlNANilU.    HISTORY   OF  GREAT    IlKM MN' 


gvianmtcc  lirilisii  acuiitaiiccs  aKainsl  pr-ulucc  after  I  lie  ctn- 
imiictinciit  of  tlic  war.  Siali  a  mctli.ul  would  have  heiii  iiothiiiK 
more  tliaii  w^-uv^  cNi>iiii!,'  macliiiu'ry.  hypotliccatiii},'  state  crcilit 
ami  makiiiK  the  >tate  the  i^uaraiit-pr  of  the  transactions  of  the 
l^iiiks  aiiil  acceplinji  house-.  The  other  metho.I.  and  the  alterna- 
tive, was  the  restoration  ..t  tlu  -'Id  niadnmry  l.y  relcasinj,'  en- 
dorsers and  draw..Ts  and  retainini.;  the  liahility  of  accept(jrs. 
When  thi^  wa>  accoinpli^he<l  the  endorsers  and  <lrawers  woiilti 
|,c  tree  t..  undertake  new  I.usines>.  Thi>  part  >>i  the  plan  did 
not  cortie  into  full  force  utitil  Sei)teniher  :..  when  the  government 
issued  a  incin.T.iiilmn  -talin^,^  what  the  hank  would  do  in  redis- 
coinitiu}.;  accepted  hdN. 

The  tirst  step  in  the  re-t.  r.itiou  ,.i  confidence  was  the  general 
pusfpoiienient  (. August  '.'•.   I'M  1  i 

..I  the  pavnient  of  any  :  ill  of  exchan^'e.  or  of  .un  nei;"- 
tiahle  instrument,  or  of  anv  other  pavnient  in  pur-uauce  of 
any  contract,  to  such  an  extent,  for  such  a  time,  and  -uliject 
to  such  conditions  or  other  provi^i.>ns  as  may  he  specilied 

in  the  pp.clamati..n-,  .  .  .  I'lii-  act  mav  remain  in  f'Tce 
f,,r  a  pfvi"d  "!  -i\  ni-iiili-  tr-ni  the  dale  of  the  pa-sin,ii 
thereof. 

The  roy;d  pr.  .clainati. -n  .  i  Au,i;ii-t  J.  I'.'ll.  limilol  thr  p-M- 
pMiu'iiieiit  -I  ptMiient  t..  ImII^  -f  e\chan,<ie  -tluT  th.iii  a  cluvk.  or 
bill,  or  demand  and  provide.l  that  the  .-uTcpt.  r  automaiu-aUy  re- 
accepts  the  hill  f..r  :i  peri-d  -i  -.le  ni-nih  The  pr.  .clamati.  .11  -i 
.\uL;n-t  •;  \\a-  iiimvl'  -iieoilic  .•md  «.iuniuT.i!etl  the  iiiVin-  "i  pay- 
ments to  vJiK-h  the  !'.  -tp-iiiinent  ..|  I'aMiieii!-  -\:t  di.i  not 
apjilv.'  Am..nu  thoe  were  w;iu<  ■-.  lial'ilitie-  le-  than  i''  m 
amount,  rate-  .t  ta\e-.  maritime  irLJ-ht.  ilehls  ot  a  inr^.'iial 
character  due  from  persons  (Uit-ide  the  I'.rit.-h  Me-,  di  ■  ideiid-. 
liabilities  oi  lank-  "U  n-te-  ^i  i-ne.  paxnieiit-  by  the  L;Mvern- 
ment,  pavnient-  in  ,-i  eieties  or-aiii/ed  umler  the  Xati.iU.d  Iii-nr- 
ance  .\ct  (H'll)  and  the  Workmen";  c'.iniien-.at'.'ii  Act.  I'.'H';, 
and  pavnient-  of  depositors  in  tru-tee  -.iviiiL;-  bank-.  1  br  proc- 
lamation of  .\u,L;u-t  1-  extended  tlie  p  .-tpoiiemenl  of  pa\ment- 
'  London  Gacettc,  Augu-t  '.  !'"•!.  ;..  ill;'". 


IM  Ml  PI  \  I  1. 


INANCIAI,    DIKKICULTVES 


i;{ 


tM  ;iii\  l),itil\>  \\liii-i-  iiriiui|i.il  place  "f  Imsiiifss  na"  in  aii\  part 
(jf  Iiis  Maje->t\'  li.  ininin-  "f  .itis  I'liiti-h  jimtectorate  '  )i\ 
tl)c  •"III  'it  S'.'iiitsiilK'r  aiii'tlKT  pr-iclamatiiiii  cNtctuli-il  tlic  time  <>( 
iiDiipavmfm  i>>r  an  additinnal  iniiitli."  and  nii  Scptcnihor  oO  tlic 
rox'd  pnu'laniatiMii  ..f  tliat  datt-  aiulinrizcd  a  final  f\ton>i<in  of 
tinu'  t"  X'lvi'inlicr  1.  I^'l  I.  i!i'1;l;1i  rdliin^  iip^  n  all  pt'r>"n>  who 
can  to  di<cliar.L,'t'  tlicir  lial)ilitic-.  uitliout  iklay.  TIh-  pa\inciit> 
of  rent  and  amounts  ^hw  t'ntn  >>t  i)ayal>lc'  to  a  retail  dealer 
were  spccitkally  excluded  iriiii  ilie  provisions  of  tlie  procla- 
mation. 

I'ostpoiiemeiit  of  payment^  couhl  n.'i  liy  the  very  nature  oi  the 
situation  he  ainthinij  nvre  than  an  opportunity  to  catch  hreith. 
I  lie  inaiiiteiiaiu-e  of  ihc  icciptini;  h^ai-i'^  was  vitally  important 
!'  thi.-  C'litinuancc  .f  iiiteniati'inal  trade  up' 'ii  wlurh  1  upland 
dejjended  f'T  lu-r  -iippHi  -  and  miicli  of  jut  financial  -upport. 
So  it  was  an  Milled  that  tlie  I '.auk  of  luii^lanil  mii;ht  lend  tlic 
acceptiiiLT  Itou»e-<  mom'\  to  pay  the  hills  when  tiiey  fell  dae,  the 
government  f^uaraiiteeiiiL;  the  hank  aL;ain-t  I-i--  on  tlie  iran-- 
action.  !'>>■  this  arrani;emeiu  the  liiiK  hild  h\  the  joint  .lock 
hanks  once  more  hecame  an  a>scl  and  relieve<l  lh<-  ]ire--nrr  the 
kanks  were  hrin,t;ini,  on  the  hill  hroker->.' 

I'art  of  the  iiioi-i,---  ha~  ah'ead)  heen  de~crihe(l.  hnl  the  hoju'  of 
a  hctlernient  of  the  -ituation  dnrin.;.;  liie  perio.l  i,i'  tin-  e\ten.-ion 
of  ihe  arrc])taiue  date  proved  di-a])|iointin^".  The  discoiml 
market  came  to  a  -la.nd-tilj.  To  meet  lhi>  situation  it  ua>  an- 
nounced oil  \iiL,'ust  !"•  that  tl\e  Hank  of  JMi^land  would  di-count 
aii]iroved  hilU  tliat  had  keen  accejited  hcfore  August  I  withotit 
recour-e  to  the  holder,  and  upon  their  maturity  tlie  hank  would 
V;ive  the  acce])tors  the  ojipiirtunitx  uiud  further  notice  oi  po^t- 
p'  nin'4  paunent.      Th.e  liank  autlio^rities  stated   that    they    Wou'd 


lie  prepared  to  appro\c  «uch  hi!!s  i<\  exchanf.;e  a-  are  cus- 
toiuanly  di-coujued  h\-  them  and  also  ■^mnl  trade  hills  and 

■  Ibid..  Aiimist  l:i.  I'M  t.  |).  i;:i77. 

=  Ibid..  Selitcnilicr    I.    ll'll.  p.  HflUl. 

'  I  hid..  S<'ptembcr  ■'*>.  \'>\i.  p.  T'li;'' 

•  U  ithcrs :  War  and  I.omhivd  Stnct,  p.  '!•'. 

'  The  Times.  August  I:*.  H'14. 


14 


Tin-:  riNANtiAi.  history  oi-  i;kf.at  hkitain 


culiiiiKil  \\nu>  aivl  liaiik 


liu'  acci'iJtaiRL--  <<i  >uch  i.jrci.:;n  am 
a.L;ciu;if>  a>  arc  f^ialili>hc.l  m  I  .rcat  llritam 

at  intcrc-t  i'  per  clmu  above  llif  var\ing  luiiik  rate.  This  remark- 
ahk'  provision  (liil'^MVL'  the  result-  expected  Dr.  September  •". 
the  bank  amiMunce.l  tiiat  it  uoukl  v,"\\  lend  money  to  accei)t'T-> 
t(.  ni'.-et  their  i)ill>  and  thu.-  reheve  b^tli  accejjtor^  and  endorsers 
nf  bill-.  Likewise  tlie  aecei)tors  were  t^  acee])t  an\  lir>t  char.^e 
ill  Ku^ir  of  the  holders  of  sueh  bilN  a^  may  have  been  drawn  Miice 
Au-n-t  \.  Ihe  bank  a!-o  a-reed  t..  make  no  claim  f^r  repa\- 
mcni  u;;til  a  >ear  after  the  war 

in  iirder  t>  >  facilitate  iredi  bu^ine--  an.l  the  movement  of 
l>niihice  and  merchandise  from  and  to  all  part-  of  the  world, 
the  i-int  >tM(;k  bank>  have  arranged,  with  the  cooperation,  it 
nece>~arv.  ..f  the  I'^ank  nf  lui-land  and  the  ij.  .vernmen',  to 
adxance  t-.  client-  the  amount-  nece-ary  t"  pav  their  accept- 
ance- at  matnritv  where  the  fnnds  lia-.-.-  not  been  t)ro\ided 
in  due  time  bv  the  client-  of  the  acceptor-,  d'he  acceptor 
\\,n\h\  have  to'  -ati-f\  the  joint  -lock  bank-  -r  the  ikank  of 
i''.n<,dand  both  a-  to  tlie  nature  of  the  tran^actlMn  and  a-  t.i 
the'"rea>Mn  whv  the  moiiev  is  not  forthcmnnt;  irom  the 
client.  Tlu-e  advances  would  be  on  the  -ame  terms  :'.s 
regard-  intcre-t  a-  the  premorato.mm  bill  a<lvances.' 


'i"hv  iir.ivi-ii.n  '■(  the  plan-  to  maintain  exchan.i:e  and.  to  le--en 
the  nieriia  int-i  which  the  .ile  of  bill<  liad  fallen  wa-  rev-lution- 
arv  in  l-.n-b-h  iin.ance,  but  it  secmin-ly  accoinpli-hed  it-  re-uit 
(hie  t-  it-  ade.pi.-icy  and  noldne--.  I'or  a  -mall  intere-t  of  •_'  per 
c-vnt  tlu-  bill-  ..I  acccjitoi-  were  practically  insured.  <»i  the  7 
pc,  cert  char-ed  i"  _■  N'^ent  to  tin  -"vernment,  1  iier  cent  t..  bank 
a-  intcre-t  and  '•  per  cent  .a-  ci'inmi-iMn.  ddie  <  hancelb'r  oi 
the  l-.\che(iuer  -tated.  that  the  t^tal  am.  lunt  <'\  bill-  di-^cunte.!  •  ^n 
tlu-  -.A-ernment  -iiarantec-  wa.^  £l  l'h  ,(»(M!,uu(i. '  I„  rei-ly  to  a 
ipie-ti-n  ,1-ked  rei;.irdin-  the  amount  advanced  by  the  I  reas-arv 
t,.  tirm-  in  h.^id-n  in  ^rd.er  t-  meet  their  (ibhgatii.n-  in  the  earn 
tiavs  -f  tile  war.  the  Chancell-r  -f  the  I'^scheipier  -tated  that  the 


'  Tlh-  I'im.-s.  Si'ptcmbiT  :!",  H'l-^. 

'  PiVluimnitary  /.',7>Jf.v.  H.  C,  Xovcnibtr 


l-'ll. 


5n 


IM.MKDIAllC     n^'WCIAl.    I  il  1  i  U  T  l.T  IKS 


ir> 


total  v.;i"  alM'Ut  £-_'iH>.(HKi.iinii  ;ii^,l  till-  aiiinnut  I'liti^tanilini:  mi 
Nnxfinlrr  :;!.  I'.'i:.,  ua^  aiMut  £L':.,:><iii.Mn(i.'  I'Ih-  ni'  rat.  .riuni 
(.•aiiic  tM  an  i-in!  X-VLMiihcr  !,  I'.'ll,  tli..ii,i:li  the  hank-  luul  ically 
cndc'l  it.  su  far  a-  t!u-y  were  c  .nccrni'M,  in  Scpicnili-r. 

' /'iir/i,imc-ii/,irv  lU-balcs.  U.  C,  December  --,  l''l"'. 


CH  \PTER  11 

Additional  Emergency  Measures 

'l'!u'  L,M\i.Tnni'.:it  ni'ja-urc-  xct  l  <  In;  c  iii-^iikTLil  m  nici'iiii^  the 
rniaiicial  -ituati'  iii  ,.i  ilit;  <  iptiiiiiu  <  i  tin-  w  ar  arc  tlie  ^  '.irrrnc}  and 
Hank  .\iiiv-  \ct.  tlir  rc-t.  .raii' 'H  ..f  tliL'  -^i^ck  cxclianuf,  the 
C'uurt>  I-"nuii;vnrv  Ac.  ami  thi.'  Shi]i|iiiiL;  In-urancv  \n.  While 
ihi'  la-t  I  i  ihc-c  i~  iH't  (H-tiiici!}'  !inaiK-taI  in  cliaractcr  ni  it-> 
lar,!;cr  ]ilia>cs.  vn  u  iaM|nirril  'I'rca-urx'  rc.^iiiaU' ai  and  imancial 
j)rr)visi<iii>  t"  farrv   ■  <u{. 

'I'll  i:    <  '!    KKLMV    Si  it  a  1I(i\ 

Ii  nin-t  he  -aid  in  in-tii-c  t>i  tlu'  i-'nL;li-h  pnlilic  that  there  was 
nn  i;rtat  e\  idenee  "i  a  lack'  'f  Ciint'idence  in  the  ability  i.t  the 
natiiai  t..  inani'ain  it-  tinancial  -tatu-  at   the  i  peiiinL;  ••{  the  war. 

'.  )n  Jul>   -".'.  tl-.e  i'.ank  ■.('  I'.nuland  l--t  i.l.i'!:;. in  -"M  l^-  the 

|irM\inee-  and  an.  addili'mal  -nin  ■  i  i'-,J  !  1  .n'lo  in  tlu-  week  end- 
ini;  .\u;4n>t  !.  liiere  wa-  >.  inie  iMardin.i^  1)\  the  l)ank-.  I'-^r  the 
t,'.i!d  re-er-e  ■■!'  the  I'.ank  if  h'n-land  \\a.-  reduced,  I'rnni 
i.i'i;.^7."'.I'.' I  I"  t'.'.'.'i'ii;,!.  1'.'.  Willi  ihe  e\ten-i-n  "l"  the  I'ank 
ll(ilida\-  and  the  -'.eadilx'  enlar^inu  m'm|K'  ■  n'  the  nr -rai.  iriuni 
llie  piiMic  hecaiiie  in^re  mtere-led  in  the  jir. '-]}ect  ni  a  iiMney 
I'annne  and  lie;,aii  I'l  heard  ciii  and  n.'te-.  >■  me  ''t  the  hank- 
had  alreadv  -et  the  exanijile  and  a  rnn  > 'ii  the  ji  iur  -ti'ck  haiik- 
lecan'.e  al  lea-l  |ir(i>|,v:vii\c. 

I'he-e  institn'iiin-  were  in  a  dit't'icult  jn  -iti'-n.  I'heir  a--;et- 
were  nnavaihiMe  in-ufar  a-  tlie\  were  in  the  t'linii  I'l'  -hi  .rt  lern; 
liills  and  iliey  did  not  feel  ilia.t  it  \\:i-  w  i-e  t.  ■  pax  >  int  i;"ld.  The 
>iinatiiin  culd  have  heen  met  wnh^ui  inncli  diliicnlty  il  the  gi'v- 
crniuent  had  had  "U  haul  an  enieri^ency  curreiic}'. 

'i'hc  licet  \\a>  reailw  and  the  cxpeditiMr.ai  \    firce  wa-  readw 
The  tiiiancitd  machinery  wa-  n..t.      i'art  <•{  ttie  machinery 

10 


Aimi  n< 


iNAL    KMKUi.r.NHV     MKASTKi' 


i: 


was 


i 


i 


ua^  a  Mipi.lv  r,i  r.Mtt-  t'..  take  'lir  iilacc  -i  -ur  - 
,,   ilK'  cv,l  di^.a^r  ..>•  h.anlm-  -h->>M  l...-:ik   t..rth 
likclv       Lnn^cMiunth.   wlutluT  the  .m1   wa-  met    Lv   a    m-.-^- 
neuMnn   ..f   the    r.auk     \ci.   -r   Lv   an   i~Mie  ,,t    u-vminu-nt 
,„,t,.,,  a  -applv  ,.1  il  an.l   1"^.  n.^o-  mu,l;1u  t..  have  Invu  ,n 
i-Ni-Icnce.' 
TlK-  'nank^  ^^vvv  api-reheiiMvo  al.iUl  the  Mtn.ati.^n  an.l  the  l'-v- 
.nin.ent    tn..k    nnn.e.liate    ■•    l-    t.,    i.r..tect    them    hv    three    nn- 
n^Ttant  n>ea-.ure^  uluch  were  the  general  nvTU-  ruun.  the  (  ur- 
r.nev  an.l  ikmk  Xnte-  Act  nf  Au^u^t  'i.  an.l  th.e  i^Mie  .■!   i\  and 
1,,.  VnrrencN   n^le^.'     The  act. >l    Xn^nM  ';  auth.  .n/e.l  the    I  rea~- 
nrv  tM  .u-pen,i  the  Hank  Aet  if  nece-^ary/    Thi-  wa~  n-t  d.  .le. 
o„a-  the   u-vern-nent   nn.k-t.-k   t..  d.,,   what    the  act    anth..n/ed 
the  r.ank  -l"  l-.r.-land  i.- d^.     The  apiirehenMun  x^lnch  e.^iiiraited 
the  l.ank-  wa>  that   thue  nn,L:ht  he  a   nm  ■  n  their  depuMl-.  and 
hcean-e  thev  w..n1d  n-l  have  a  M,ttK-,-iH  le:;al  tender  thex    c  atld 
„,,,    meet    the  demand^  that    nr,L;ht    he   niad.e  .n   then;.      It    wa^ 
therefore  c.-n>idered  nece-^a.rv  that  the    Trea-arv  di.iild  i^mu'  t\ 
and    in~.  le.ual  ten.Ur  n-te^.       T-  ireet  the  need<  -i   the  uiterval 
hetv.een     \ni;uM   '•.  and   the  jirintin-   -i    the  n-te^.   j.-Mal   -  rder^ 
were  niada-  current  and  le.ual  tender  ui  the  I'nite.l  Kin-.l-ni  i-r 
,he  pavnient  ..f  a.nv  ant-unt.      It  ua-  further  pn  Aided  that  the 
p,.,ta.r.Tder^  >hnuld  he  redeemahle  at  the  I'.ank  ..f  l-,m,dand.  ui  any 
o  ,n  uhi.-h  1^  k-al  tender.       Idie  hank^  ..f  i^~ue  m  ^o  aland  and 
Ireland  were  iierniiited  t..  i)ay  their  n-ae-^  ni  nnte^  nt    ihi>  i>Mte 
a.   wei;   a.-  n.  unhh-ld  pa>ment   ■ -n  their  nun  n-te-  except   at 

head  ijtt!ce-^. 

A  niein-randnin  nf  the  I'reasury  immediately  f.ai.Ave.l  the  act 
in  which  it  wa~  explained  h-w  the  imte.-  were  tn  he  iibced  m 
rirculati-n.  .\-  the  rwte>  were  i--rad  a^  temp  .Tar>  reliei  f •  r  the 
hank^  the  l'.;mk  -if  iui-land  ac'ed  a-,  the  a.-ency,  and  then  the 
I  rea>urv  ,.-ued  the  n-te-  t-  the  hank^  u])  t-  a  maximum  limit  nf 
_Mi  per  cent  nf  liahilitie-  nn  dep^.Mt  and  current  accnuni-.  '1  he 
secnritv  f^r  ''le  Trea-nrv  wa-  a  n.atiuL:  charge  u]).  n  the  hank 
asset.-;   Miperi.r  t^   all  nfner  claim,  and  k^earm-   interest  at  the 

'  Withers:  liar  and  Lombard  Sln\t.  p.  '■''-■ 
'  l.oudnu  Gacittc.  .\iiKiist  <>.  i'-'l-l. 


J3 


18 


Till:    II.NANCIAI.    IMSTOKY    OF    f.RKAT    liRlTAl.V 


L-UTcnt  hank  rate.  TIk-  aiiKiuiU-  taken  1)_\  the  hank^  ultc  ciim- 
paratux'lv  -in.;  ..  i  l:;.'"i"J'i'i',  a<,'ain>l  a  pi  --ihk-  inaxnnuin  ni 
iL'i'.'i.niMi.n.iii.  At  ilicfinl  i>t  the  ])(.Tii'<l  jiuK-  '•',  I'-'l"'.  thi-  aiiinuiit 
(lUtstaii'liii.L;  ua-  rcji'irtcd  li_\  the  Chaiiccll.  r  "i  the  ilxcliciiucr  as 
,,nl>   il;;'.»."MHi.' 

'I'lu'  i--iR-  Mt"  thi,'-!.'  ii'itcs  was  an  cxpci intent  in  l'".nt;li>li  finance. 
l-.-neil  a-  a  tempi Tary  niean>  t^  meet  an  nnn-ua'  situatimi.  they 
hiave  nevertheU-"  remained  ni  eirculati'ii  (lining  tlie  entire  cuir-e 
nt  th.e  war  ami  have  -teaiiil)  inerea-ec!  in  aniinmt.  .\-  a  means 
ti.  the  rapid  re-tnratinn  <.<i  enntidenee  ann  iil;  the  hank-  the>e  iiutes 
were  exceptionally  etTecti\e.  hut  they  i'axr  enine  tn  he  relied 
nimn  h\  the  i;ii\ernment  fur  a>-i-tance  m  hridum-  ■ 'ver  linrmeial 
dit'ticnl'iev  (  )n  .\n.un-~t  i' 1 ,  I'-'ll,  there  were  £l' 1  .."i:;."i, <•(;;,  ,  f 
imte-  .and  crtiiicate-  ■ 'iit-tandin.L,' :  at  the  eh  ~e  .'i  che  inlliwini; 
\ear,  i  )eeenilier  l".'.  the  ami  iimt  rejn  irted  reaelied  £  M:;,  1  l'.'i.h'.''.", 
and  nn  .\'<  veniher  11.  I'-'IT,  the  t..tal  then  uut--tan(liii,<;  was 
£iiti.;i:.:^,:.j^.' 


TllK  SilH'K    l{.\eii  AXe.K   I'rhhi    ..".k 

At  the  I'penin;;  ni  the  war  the  Lcndnii  -tuck  e\chan<:;e  was 
t1iii ided  uith  internatii iiial  -tucks  >eekini^  licimdatii .n  at  alnin-t  any 
jirice.  rill.-  price-  fell,  alt'ectinu  the  v.ihie  uf  -t'ck-  held  mi 
m,arL:in  and  rai>im;  .i-  a  ci 'n-e(|nence.  inanv  imimrtant  i--ues  re- 
i^.irdin^  the  ])in-pii-e-  nf  the  hank-  .and  the  Lieneral  credit  uf  the 
citv.  d"he  three  danger  pMint-  in  the  tin.ancia!  i  .rL;;mizati"n-  were 
the  li.ank-.  die  -ti  ck  exch.an^e,  and  internatiniial  exchaiii^e.  'idle 
clii-in;;-  ><i  th.e  -ti'ck  (.xchaiiL^e  fnllnwed.  in  ird.er  th.it  at  le.ist 
tempi  ir.iriU  i  tie  <■{  the-e  danL;er  puint-  niii^ht  he  rcninved. 
Xever  hefi  re  h.ad  thi-  keen  ik'ne.  hnt  the  very  ellectivenes-  of 
Ci  immnnicatinn.  the  artilici.d  -\-tem  I'f  ]inroha-e  nil  inari;in-  and 
tile  1..  irri'\',  uiir  I'H  ^ti  ick  cnllaterid-  emkinuered  the  hruker.-,  the 
Laiiks  ;nid  the  interest-  i\  linlder-.  .\i  the  -anie  time  the  ck  -in.^ 
iif  the  cNclian.ue  made  it  -till  nmre  dit'ticult  fur  the  hank-  tn  avail 

'Speech  of  Llnyd  tk-orgc,  /'iir/i,;:)i,-;,r,;rv  I\-!\itrs.  H.  C.  .\\i\cniber  -T,^S, 

i!u:. 

'London  I'c'iiioiiiisf.  XnvemlHT  17.   \'M'.  p.  >!'■. 


AHiii  ri'iXM.  i:mi-Ki;i'.ni.:v   Mi;A.-rKi:s 


r,i 


thcm-^flvf-   "\    the    rc^Murci'-   tliat    tlioy   h;nl    rc-.inlcil    a.>    (|Uick 

'llu'  -;inati..n  iiii.^ln  have  ln'iii  iiir.ch  w.  .r-c  than  ii  ua-  ii  the 
])m-i-(HnL;  \.'ar-  ha.l  n.  •!  rt-Uu-ol  iii-M  -t-ck  r-pccuhitnr^  t..  ni-re 
(,r  lc~M-auti.iu^  iiKhvulnaU.  I'-rtnnalely  the  stock  e\cliaii.L;c  hoi- 
riiuiiii:<  \Nere  a;  a  l-u  |>.  nit.  rMiiii)aratively  sjH'akin;;,  th^u^'h  it 
was  stated  hv  the  ( 'liaiKell-r  ..t"  the   I'.xcheiiuer  that  ;he  am.  .mil 

rutstaii.hn-   uas   h.-tucen    £M,.(H,n,(Mii.  aii.l    i:>'>. '.'        Ihit 

niitsale  'if  the  actual  dealers,  the  lanks  had  lM;me<l  -ii  ^t-ck 
e\chani;e  securities  as  cnllateral  an  aniMUiit  i)lace.l  as  hi-h  as 
£^:,u  uiKi.nod.  'Die  hanks  were  practicall)  lieliile—  sm  tar  as 
Ciiiceriied  tlu-  i-re-sin-  "i  their  claims  f ,  ,r  paynu-iu.  i.''\\er 
prices  u..uld  have  resulted  and  it"  the  st-ck  eNcliaHi^e  had  oai- 
timied  'lien,  the  eiieinv  uuuld  have  s.  .Id  his  securities  nu  tlie 
e\. halite,  dh.e  eli'ecl,  I"",  upmi  the  i^Mvernment's  kian  p.  ilicy 
would  have  heeii  rellected  m  the  1,'reater  dilVictiltv  of  ,i;ettin-  -atis- 
factorv  prices  for  its  offerings. 

The  closin-  of  the  exchaiiLre  was  a  fore^-one  conclusion  and  its 
(.pemii-  a  matter  of  <,rovennnent  ])ohcv.  After  ti\e  months  oi 
(|uiescence.  theexci.an.ue  resumed  Inisuiess  January  1,  I'.'i:..  The 
restrictions  imposed  hy  the  d'reasurv  were  severe,  varym.i;  mm 
hours  of  husiness  to  tixed  prices  for  sales.  The  exch.an-e  was 
opened  hetween  I'M-  and  :;."(>  o'ckck,  all  sales  uere  f-r  cash, 
optio,ns  ami  arhitra-e  toUisactioi,-  forhidden.  im  s,-,1cs  uere  al- 
l,',wed  helow  the  prices  tixed  and  the  exchatiiie  was  not  permitted 
to  deal  in  i-sues.  unless  spcciiicali\  approved  hv  the  Treasurv. 
that  uere  oliVred  to  the  puhlic  after  January  I.  I'.M."..  In  order 
to  prevent  the  sale  of  enemy  securities  ;i  L^ood  deiiverv  luust  con- 
tain ,1  cert.hcation  that  the  securities  liad  not  hee-i  m  the  haiKN 
..i  the  eiiemv  prior  to  .^cptemhcr  ■•■<<.  r.'ll.  .Ml  "i  tiu-e  jiro- 
vi.sious  liad  to  do  with  the  opeiiiuL;  .'f  the  exch.an,i,^e  and  ■  llered 
no  relief  for  the  harassed  hroker-  and  hanks,  iljfore  the  ex- 
chanj^e  could  open  it  was  necessary  to  i)rovide  some  means  to 
meet  this  -ituation. 

•  S],ri.c1i   -t    Lluv.l   (.curgc,    i\i'iuuiun:ar\   iJcbdtcs.   H.   L.    .\ov<.nit)t  r   -., 


:>0  illl.    I  l\  W'lIAI.    III.-TI'KV    ni-    (-.RTM     ItUirAIN' 

'i"lu'  iiiiil-.\ir,n-t  -i.iili'T!K-nt  was  postp'iiic-il  nni-.l  X.  ivi-nil.cr  I-' 
ami  pi.irtiralU  ("iiiplcU'l  mi  tlu-  f-llowini:  day,  A  ivw  market 
ua-  a  ]!■  litical  iiii]M  .>>il)ilily.  whiic  l!u'  imiTC>t  "f  the  liaiik-  airl 
tlic  incm'  (.r-  ni  the  cxclia.n.L:-'  jj'  uiuM  ~tr..ii-l\  t'i  the  wi-il-m  "t 
clusini:.  The  (h!V:cnhie^  .-i"  el'-ini:  were  -  ititewhat  ihiiiiiii -hed 
l,v  the  |i..~-iliihlv  .11  apiil.iii'^  t-  the  -t-n-k  e\chaii-e  the  priiicii)le 
ilevel"iie<l  hv  ilie  -i i\ eriiniei;l  in  iiieetini:  the  jjfi  lileiii-  "i  inter- 
iiatiiiiial  exeha;i-e.'  .M:'.tter>  .h-a.;i;e.l  .  ii  inilil  (»ct.  iier  ■''\.  1ie- 
['.  ire  the  I'rea-iirv  an:i' >'ii!ice(l  tl^  plaii  ^it  .lealini;  \\:th  the  -t^ck 
exchange  ^ituatinn.  I  ii.ler  thi-  jilaii  the  l;. '\  eminent  arran:;e.l 
with  tlie  I'.ank  "\   l-ait^laiii! 

1.1  a.lvanee  t..  lender,-  le'  wh.-ni  tiie  >clieine  i^  appliealile  '■'" 
per  lent  "i  the  value  nf  the  <eciirilic-.  at  jiresciit  held  hv  the 

ler.ler-  a-ain-t  an\  l.^an  which  !he\  had  .  a!t>tandiii.^  ..n  \u\\ 
1".'.  I'.'l  I,  -ueh  >ecnrhie-  n.  he  \ahie  f.  i'  the  ]nirii.-e  ..1  the 
advanre  at  the  niakiii;;-  up  i)riee~  i.  ^r  Jiil\    -'■'  -eilleinent." 

it  was  lel't  III  the  I'lank  .-i"  lai-laiid  t'.  refn-e  any  aiijiheati.  .ii  with 
the  general  ,L;.iverinnent  ji.  .Ih'}  in  niiivl  t. .  i.revent  a-  tar  a-  p.  >-- 
-ihle  tlu  f.  •reeil  reali/atii.n  .ii  secnrif'e-.  !•.  ]ir.  .tect  tiie  -..\  em- 
inent, h  th  tile  len.jer  and  li.'rr.  iwer  were  made  {..iii'ly  au.l  -ev- 
ei-alK  lial.le  t.  ■  ti:e  Hank  ni"  l-aii^^iaiKl.  The  time  "i  ajiphcati.^n 
\\a-  hniiied  t.>  lannar\  'M.  I'.M."..  l.^an-  under  the  -eheiiie  were 
t.i  hear  1  per  eeiit  inure-l  a1i.'\e  the  hank  rate,  with  ;i  mniimnm 
i.f  ■'  per  cent  ni  all.  Iniere-l  wa-  t"  he  paid  t'.  irtniuhtl\  an.l  alter 
the  -t-  i-k  exclianu'e  was  .-i.ene.!  .it  tlie  re-nlar  settlement  dales. 
It  w;i-  ,aK.'  pr'.\i(UM!  that  the  Ikink  i<i  l\nL;l;'.n.l  wa-  n.  .1  t..  pre.>s 
1.  ir  repaMneiit  .f  ;idv;mee~  m.a.le  nmler  the  -eheine  nnti!  the 
expiratii.n  •■{  iwehe  m.ull:-  alter  the  enncln-i.  r,  ..l  peace  .  .r 
after  the  exjurx  .-f  the  (.'urt^  |-;rierL;enc\  Act  ..f  I'.'l  i  it  lliat 
she)uld  li.ip|)en  tir.-l. 

Thi  -ame  pr..\  i-i.  ni-;  were  extende.l  t..  ])r. '\incial  exchantre- 
;m.l  t..  the  ctt'  r.  e'-.ehan!L;e  at  i.iserp.  •.  .1.  in  .'r.'er  t.i  ^ani  .a 
ele.ir  \;e\\  .  l"  the  -itnati'.n.  ih.e  (haneell.'r  i.|'  the  l'\ehe.|iier.  in 
c.;nlerence   with   reprc-ent.ativi'-  .;t    the   .  xi]ianL;e-,   ealle.l    t.'i'   a 

'  .Xrticli-:.  London  Economist,  .\ugust  i-  and  2!'.   H»l  t. 

"Tlu-  Stm'k   T"\i  limi'i    srliiin.-,  I  .oiit.ni   i'  ,-,inn-)iils! ,   \'..\  i  i;;!.tT  ~.   l''lt. 


Airill  1.  iN  \1.    l.MI.Ki.l   NCV     Ml,\~'    Kl-  "21 

-tatrnuMit  .'1  I'laii-  an.l  a^ki.''!  l-r  thr  c  ■■  .prr.ni.  n  -f  the  ^  \- 
<.-liani;c-  ■.!  the  I'liitcM  Km.u.lim.  .  i-liti'i-n  ni  miniher.  In 
l.,.n(l-n  al-iH'  the  l-an>  retiirmMl  uik'ht  the  .iiKMi-imairv  \\<rc 
>;-.  1  .(iiKi.udit.  uhilc  ;h<--(.-  ni  the  cauitr}  ih.d  r  't  fscer^l  tll."""'.- 

.MMi.       Tlie    lull   ani..unt    wa-^   thern-.^iv    iiu^Kt    fl'i', '.'"hi,    ,,i 

which  ah' an  tTT.H'in.iiud  ua^  nH'iKv   u\)'<n  uhioh  ailei|uaic  c^vcr 

had  hceii  prnvi.kMl  i-r,  IcavniL;  ii:..'"Hi, nnim  a  i-lol  i-r  ui  ihi- 

\\a>,      'I'hi-   '\u\   ii-t    repi'-eiit    the    ir.ll    aiiMinit    i''  r   tlie    rvA-^n 
that   nulli' 11-   "(   jx  uiul-  <'i   A<'c\<<  aiul    -hiare-   -tainhiiK   i"   '■  •- 
name-  "I   e\i-hani;c  nu'ii  ami  their  cheiit  -  had  heeii  taken  "\er 
'lA    iliLni    I' a-   the  l;. -d   intere-t    repia-eiUed   in    the  tra-i-actinu.' 
There   were   ."p.i">i'  ineinher-  nf  tlie    I  .iiul^ii   e\elianL;e.      (  M'   thi- 
nuinier,  prMhahl-,  '."'  per  cent  v^ere  d-in;^'-  hu-ine>s  >>u  a  le-itiinaie 
>c:  le  and  the  uther  l^  jier  eeni  c  :iild  lie  ela->ed  as  phni;,'er-  ami 
irMuMe  maker-.       The  l:m\ eminent  iiractieally  i  .verk  .ikt'd  the  '"' 
per  cent  and  iraiiklx  k » .ked  iii."ii  the  exchanue  a-  a  da  i.m  r  ji-int 
(Ine  in  part   n.  the  tran.-act!.>n>  "f  the    1"  per  cent.       I'he  -eule- 
ment  .ai  the   1-th  .-f   X.-veniher  wa-  re_L;arded  in  c.  .n-equence  as 
the  nii^-i   critical   which  the  exchange   laa.!    I'aced   in   a   hnndred 
vear>.      In  conunentiiiL;  npi'ii  the  -ituaii'-n,   the  Lmulni   lui'iu<- 
nus:  -tated ; 

It  inav  he  -aiel>  -aid  that  tlie  -ettleinent  ha-  '^"m-  ihrMii-h. 
with  inhnitelv  iiMre  ea-e  than  aint.ne  exiiected  ten  da\-  ■  r 
a  fMrtni^ht  iv^i>.  .  .  •  lait  the  l.n-ad  fact  remain-  that  the 
tr.  ail  lie  lia-  keen  faced,  and  -nrim  .unted,  in  a  manner  whuh 
has  left  the  -ii'ck  exchan.^e  in  a  ji'i-itKiii  -  ■  much  -■  under 
than  it  "ccuiiied  hefnre  that,  a-  alreaih'  nh-erved.  the  path. 
tM  rc'peninL:  i-  rendered  nut  (■nlv  jilain,  hut  perfectlv  jm >  — 
sihle.  -' 

Tin;   ('(irKT-    F.MKRiiKNCV'    Aci 

Th.e  m-rat.irium  emded    f. -r  all  deht-  • -n   Xnveniher    1.    I'-MI. 

and  en  (  ict'Ter  4,  the  mirat.Tium  f^r  lall-  nf  exchan.^e.  deht- 

(lue  t"  and   fr^m  retail  dealer^  and  rent-  came  l"  an  end.      i-'ur 

those  wliM  f.mnd  it  diificnlt  X"  adiu-t  their  atlairs  -ati-factMnly. 

the  (.'cnrt-  ITiieru'encv    \ct.   I'.'l  1,  i)r<>vided  a  way  tn  t;ct  at  lea-t 

'London  iu-onoinist.  iJctulicr  1".   l'''k  [>,  '^'l 
'Ibid.,  Xovciiiber  -^1,  U'H.  p    'Ml 


Jl'  .'H!:    !-!N  \.Vi  !  \!.    MISlfiRY    'M'    i,Hl\T    r.R?r\I\' 

Ir|L,Ml  i  |i:!ii'ii  coiicfriiuiu  tlir  v;ili<litv  ^f  tlu'ir  i-xru-ts.  '1  hi.^  act 
plarcii  ,1  rln  ik  ..ti  t!ic  cxtTrisr  <il'  cT(.'(liti  irs'  rij^lit-^  ^cniTally  ami 
j^'a\c  (Iclili  r->  i)ri.ttTti''ii  within  riTM^ni/cil  liniii--.  'I  lu-  cn-ilit'T-. 
l)y  it>^  1)1'' >\  !-i'  11-,  i-'HiIil  iM't  jir(,(,-i-ril  Im  t-xfcutiih  'T  cnl.  irct.  imiil 
iif  a  jmlmiK-nt  "i  am  OMiirt  i'  r  tliv  i)a\iiiciit  i-i'  a  m;iii  >>\  m"ncy, 
li'  r  Ifv\  i!i-i!c--  iMf  iiMiipauiu-nt  >•{  rent  ulicri.-  tlif  rent  wa>  less 
tiian  i''<*  |irr  annum.  I  1k'  ai't  aKi.  pri 'Inhileil  llu-  takiiij^  pus-cs- 
-ii'ii  i<\  \tV'  ]nTl\  "V  till-  rcH-nir\  t"  i-nfurci'  payment  "t  muney,  <ir 
I'lTeclii-f  I  r  reali/i-  "ii  an\  sce-nrit\  with  the  e\eeiitinn  mi  a  --ale 
liv  a  inortj.;a;,'e  aiieaiU  in  jn  i-,-.c,xi,  ,n,  l.ife  in-urance  preinunn- 
iif  £-•">  nr  un<lcr  cduK!  imI  lap-e  t'l.r  n'>nj)ayitient  wliere  the\  luul 
keen  {)ai(i  pir  at  iea-t  tu.i  year--  pn.'r  t.>  ,\n^n-t  I,  I'M  1.  in 
]ir(ilect  hini-clt",  the  ere' 'in  ii"  ua-  rri|uirei!  tn  make  hi-  apphi-ati'.n 
I'l  tile  iiii^h  (  .'Urt,  (  Muntry  (  Miirl  ^r  (  mirt  "i'  Snmmarx  Jr.ris- 
ihctioii.  I'he  (lehtMr.  in  hi-  deleii-e,  w  a  -  reijuire^l  t"  -Imw  that 
he  wa-  nnaMe  t"  pay  h\  rea-'ii  "t  ein-nm>taiu"es  ilne  :  i  tlie  war. 
Tile  e^'Ur*  \\a-  tlien  at  hherts  t.j  ilelermine  the  Le-t  thnii;  t'l  lie 
il'iie  miller  tile  circum-tanee^.  The  act  ilul  iiwt  allect  pawii- 
hri'ker-  '-r  alien  tnemie-  wIim  were  ileht'T-  ami  wa-  t.i  remain 
in  l"i  iree  until  -i\  nrtith-  ai'ter  the  war  mik>.-  nimliiicil  ov  -et 
a-i(le  !iy  <  inler  in  i. '■  luncil. 

Ihe  aet  i-  apparently  nut  e\  en  limiteil  t<  ^  liahilitie-  m- 
curretl  helnre  the  war  hrnke  uiit.  aib!  i-  in  etteet.  t!  •.■reii  ire, 
a  (h-cretii'iiary  mnratMrium  nf  unlimited  -cnjie.  It  the 
e-iiiirt-  ititerprei  the  aet  I"  mean  that  ilehtnr-  are  In  ln'  treated 
with  the  utiiiiist  K-nienc\,  (  rdinare  commercial  relations  will 
he  impii--iMe:  it'  lhe\  dn  m  t  allnw  much  latitude  the  pur- 
P"-e  I 'I  the  art  will  he  defeated.  I'arliament  ha-  niereK 
thriiwn  up' lU  ilie  cnurt.-  the  impii--ilile  ta-k  nf  deciding; 
where  tlk'  line  nf  hankruptc\  i-  t^  he  drawn  Si>me  ]iei>])le 
will  he  prntected  t'r.  in  hankruptcx ,  .-ther-  will  imt,  hut  tin 
I  tie  ci  iiitractin;;  part\  can  kn^w  until  he  trie-  t^  enfnrce  his 
ci'Ulract  whether  it  i-  eiit'i  rceahle  i  t  nut.  ri.--ihl\  the  act 
ma\'  work  cut  hetter  m  |)ractice  than  it  ])riimises  to  do  on 
pajKT,  hut  -tich  a  happ\  re-ult  will  he  due  to  the  pre-eiicc  of 
a  spirit  of  hiLih  commercial  moralit\  in  the  couiitrx ,  rather 
tliaii  to  any  inherent  nature  of  the  act  it-elf.' 
^London  Lcoiumiist,  October  ■>.   I'.'H.  p.  ."n.l 


AUlJirii  i.N  \1.    l.Ml  KilKNCY    MEASL'RES  -•' 

Sll  'I'lMNii    In^IKANCK 

At  the  Mut-i-t  Ml'  the  war.  tiic  <i<i\  iTiiniciit  rt'cn^nized  the  iiii- 
pMrlanci-  "t   -Irpiini-       Tlu'  rate--   i'-v  uar  m-urancc  vary   tr.>i'i 
r.o  t'l  7<i  L:niiU'a>  per  hundred  h'r  ve-^eN  lifl->ii<^m;4  in  any  ..i  tho 
f, ,ur  c'aiinR'ntal   I'mwit-  and  7i>  t' >  7.''  I'T  additi-nal  v<'--fl-  lic- 
iMn-inc   tM    Aiwtna    and    Italy;    v.liile    f-.r   ( .erinaiiv    and    <',rcat 
I'lritam  aI'Uv.  the  in-nrance  "U  war  ri-k-  wa-  M"  .guinea-  i)er  li\ui- 
(!red.     The-e  rate-  uere  leased  up.  ai  eertani  ennihuiali-n^   whieh 
the  j^eneral  character  mi"  tlie  war  ne^atised  and  l'r.iU,L;ht  c-rre- 
-pondinf;  <trani  up.  n  the  marine  insurance  market  winch  it  wa- 
unable  t"   -land.       ihe   irdinar>    tune   p. .licies   uere    vahjeet    m 
cxemi)ti"n-~  under  the  -ei/ure.  i-a]iture  and  detemi"n  clau-c-^.  leav- 
ing; the  ni-uranee  in  vivv.   ..f  the  n.ew  tvpe  <■{  warfare  di>tinctly 
inadeiiuate.      The  i>lan  devd-ped  li>  the  j^overnment  eiiahle.!  dup 
Muner-  t. >  ever  war  ri-k-  fn.m  v..\ai;e  t. ^  viya.ue  and  at  the  -anie 
time  materi.illy  att'ected  the  market  rale  ..f  m-uranee  iir<nnums. 
Idle  plan  wa-  ha-cl  .^n  the  iiruieijile  ..f  the  reiuMiranee  with 
the  .-tate  .^l   the  in-uraiu-e  <'\   the   l.l.\d    \->wciatiMn.      In  .-ther 
])erinds  i,i'  war.  in-uraiiee  .11  -hipi)iii,i;  ha-  iieen  tran-l'erred  frmn 
indemnitie-  t^  nunual  in-nrance  .1-- .ciati.  m-  ■  .r  (dul>.      Hie  as-o- 
ciatiin-  in  eM-tenee  were  the  .\.  rtli  'A   !  iiuland  Tr-tectmL;  and 
lndemiiit\    A— 'ciatii.ti.  the  Li'iid,.!!  lirdup  .  t   War   Ui^ks  A—.,- 
ciatiun,   and    the    !..  iiid-.n   and    l.iverp--l    War    Ui-k-    In^uranee 
Xs-i.eiatiMii.     dhe   t.tal  iii-nranee  carried   m   ihe-e  associati.  ■n- 
am.  iunted  t"  £-7,tii»"."i'".      'hi-  uiruraiice  w,i- di-liiiclly  limited, 
>ince   it   -nlv   c^  vered   ve-ei-   at    -ea.   ^r    in    an   eiimiv'-.   11.. rt    at 
time  >\   h.'-tihtie-  until  thev  reached  a   Ihitidi  p^t.       I  lie  jir.- 
vi-!.'i!-  were  much  hekw  the  requiiaineii;-  -i  the  Mtuatb.n.       1  he 
dull-.  h-\\e\er.  in-..\ided  a  |( iUiid.ati  'ii  uji.  n  which  i-  v>.;rk. 

\\;:h  thi-  I'Mundati'ii.  the  -.  ivernmeiit  t-  k  ..ver  the  in-urance 
ot  ve->el-  then  mi  Miyai^e  t-.  the  e\tem  -1  ^''  I'er  cent,  the  assc.- 
ciati.iU-  carrvint,'  the  .'ther  ■_'"  per  cent.  I'-r  -uh-eiiueut  voyages 
the  '  utier-  were  ti.  ])a\-  a  premium  wh.  .-e  maximum  wa-  n. a  to 
he  <:re;aer  than  :■  i-er  cent  .and  n.  t  l-wer  tlian  1  jicr  cent.  At 
t"ir-t  the  rate  wa-  i'.xed  at   1  '  1  per  cent  .11  hull-  f-r  -iradr  v  xri-e- 


I 


J  I 


iif!    iiN\Nrf\r.  ifisroKY  "i  i;ui-Ar  i!uir\i\ 


alhl   -    _■    [icl    Hill   '  h    i'-iliiu   \wWiu;L-.       It    w.i-   ilci'ldcil   All;,'!!--!    1  ■'« 

that  vessels  C'lild  iie  iii>urcil  for  thni.'  iib  nth^  it  a  iirciiiiiim  <it 
_' '  J  per  ci-iit.  \t  tin.'  '■]iciiiii<;  III  Scptcnihcr  the  pitniiiim  liii 
siii.t^le  vuyaj,'cs  wa:'  rctliui'l  t.i  1  per  cent  and  ruiiiul  voyaj^cs  to 
L'  per  cent.  It  was  pRivided  that  vessels  shtnild  take  urcier^  from 
the  governnient  en  n)iit''s.  calN  and  stnppn<^e-.' 


A   Sl\\I.M.\K\    el     I'.MlUr,!  .W  \    M  I  A-fKK. 

The  summary  i  t  the  i'mer_ij;eiicy  ])ruvisions  enacted  l)y  tlic  pov- 
crmueiit  unuld  extend.  Im  many  i)ha>es  oi  commercial,  tinancial 
and  political  affairs.  The  more  impnrtant  Iiave  been  descrilied  in 
the  la<t  t\\"  chapter-,  lluw  adeipiate  the^e  are  may  he  hctter 
appreciated  by  enumerating;  them  at  the  close  <jt  tliis  chapter. 
Idle  reliahilittitiun  ui  hills  of  c.xchaiii^e  by  providing  for  a<lvanccs 
on  appro\ed  l'ill>  the  provision  for  small  currency  in  the  issue 
of  i  1  and  Ion.  notes,  the  clo<ini;  i.f  the  ^tock  e.xchanije  and  the 
loaning  of  fund>  on  securities,  the  |)rovision  I'ov  relief  of  debtors 
who  were  tinancially  di.sabled  by  the  war  and  t!ie  shipping  insur- 
;ince.  in  the>e  provisions  (Ireat  liritain  reestabli-hed  her  foreif^n 
e.Nchanije  and.  proxidiiiL;  d  r  tlie  m>  \  enient  ..f  her  -liippin;.;. 
orL;anixetl  hev  interp.:il  iiu-;ines>  by  providin<;  .>-ma!l  iioti'-  t^  t  nr- 
cnlatiuii  and  ending  the  demoralization  of  <ecurit!e^  1>_\  cljsuig 
the  stock  exchan!:;e>. 

'  Description  of  i'l.in.  Llti>d  Gcorpc,   The   fiiius.  .\uwi!>t   ''.  VJli. 


CHAPTER  III 


The  War  Budgets 


In  I-'.nijlan.I  tho  InuiKct  i-  tlicuslit  nf  .t;  the  speech  of  the 
LliancelliT  of  thi'  I-.xoheiiiier  ratlur  than  the  act  of  I'arliaiiieiit 
appropnatin.L;  the  iiioiiey.     This  i>  ipiite  in  contrast  with  the  pro- 


CC( 


hire 


existing,'  in  tlie  United  States,  where  iluie  is  no  budget. 
aiul  oil  the  continent  in  luirope,  where  the  hudj^et  is  viewed  as 
tlie  document  vcttinij  f.  rtli  the  expenses  and  the  receipts  of 
reve'nic 


111 


'.Vol, 1-11    ImIiCKI     I  )i;!  tNKI) 


Ilu 


i-.iiLiii.-n  i>iui 


:ct. 


.11  t 


he  contrarv.  furecasts  the  nature 


the  revenue  or  finance  act.  The  English  system  -h.  o.  -  two  !,'reat 
funds:  the  Civil  List  aiitj  the  L'nnst)lidated  inind.  The  iirst 
1  househol.l  budget  ;;:ul  the  -econd  is  the 


reali\ 


Ih 


liecome- 


a  rova 


fund  dealini;  uitli  the  treneral  e\peii-es  of  the  <;overninent. 


•lu 


C  Dnsiilii'iatei 
exiien'htiire- 


■uuil 


!plil\-    services   consist   of    the   c  nimuiiiL 


C()St>  <. 


.Inch  are  n   I  made  li\  annual  vote 

1  Ser' 


Th 


are 


llle 


f  maiiitainiiijj  the   \rm\ .  \'a\-, .  Civil  .*^ervice,  and  Keveinu 


departments.       I  he 
-eivice-    include   tin. 


t:r-t    t''\o   need 


llo 


explanatii  'ii 


expense.- 


t    maint.'iimn'. 


am 


1  he   ci\ii 
c  n^tructiiv^ 


iniiiiic 


e-  oi   civi 


•  rks  and   hni!dnii,'>;    i  i' )    >-alarie-  and  expen- 
r-;    (  :'.  )    law    and    iiistice;    i  li   education,   -cience. 


departmen 

arts ;  (  ,"i  )  the  {(Teii;!! 

cellaneou-  -ervice-:  i  " 


a!Ul 


imal  -cr-.  ice 


I  u 


net'fective  and  tiii-- 


)   old 


neii-ii  'ii- 


ali<  ir  excnant'e- 


in-ur- 


aiice 


etc. 


he  re\  er.iie  depa 


riments  include  tho-e  of   (  1  )   cu>- 


toms  and  e.xcise;  (_)  iulaml  revenue:  ( :'- i  the  post  ottice.      1  he 
Consolidated    Inind   -tands  to  ihe  credit   of   tlie    Ivxchecpier    for 


hich  the   riaiil- 
stod 


<'i 


■.itLMallil 


and 


lie 


I'.ank 


cus 

f  ri  im  ; 
i-tered 


lan-, 

'.ear  i^ 


^collland    the    custodian- 


Ireland   are   the 
tias.-ed    around 


.ear 


aiiKiUL;  -ix  hanks.      The>e   fund:-  are  awiniii- 
throu-h  the  Tre;i--ur\    in  which  the   liriti.>h  Government 


has  a  KR-at  or^an  t^i  ^;i.'iaTai  cmr^i,  i)Ut  in  u>>  -(.-ii-c  i>  ii  a 
pulilic  -iTviic  flcpartiiicnt.  I'nr  it  <l()fs  imt  conic  in  contact  with 
tiic  pulilic  and  docs  not  collect  the  public  imuls.  that  service  Ijcing 
carried  on  hy  the  Custuni,  Excise  and  Inland  Kevenne  depart- 
ment.-. It  i-  'II  this  j^reat  department  '^i  ^nvernment  t  the 
Trcasurv)  that  i'ar'iament  :mil  liu'  puhlic  luuk  for  \vi>e  an<l 
economical  administratiun 

Tip.  1mi<>!  Wak  !U  ulKI 
l'"r('in  ilic  date  -.t  the-  Mjn.-nin<;  ot  the  war  \>>  .\pril  .".n,  r.»l-. 
tour  i^reat  Inidjiets  have  been  presented  liy  three  (.  hancellors  ut 
the  Kxche(|tur  The  peace  l)ud,i;et  for  the  \ear  I'M  1-1"'  wa-  left 
standni!.;  a-  it  \\a-  \\  !un  nUr'nluced  Mav,  I'M  I.  L'>in^  thi>  a> 
a  basi-  the  lir-t  war  liudi;et  iir-vului-  I'T  nicrea.-e  "t  taxatmn 
was  introduced  November  1';.  I'.'H,  {■  r  the  period  (.'udinK  March 
:;i.  r.M:..  The  M'cond  war  Imd-el  wa>  uitioduce-i  Sejitemher  Jl. 
I'.ii:.:  ilir  lliird.  \\>r\\  7.  I'.Mii;  and  the  fourth,  .\la>  -'.  I'MT. 
'I'lie  n.'rmal  l>uilL;et  re.|!nrein(.-nt-  <4  the  la-t  peace  \ear  arc  >et 
fortli  >u  the  folJMU  jn^  taMe; 

1-.S11.\!.\TE:U  NOKMAI.  KXl'KXDlTrKF.  r'14.1.-, 

1.    eoii^i'ii.latid  I-'uikI  siTvice.- 
Nationa;  debt  si-rvicc- 

lnttn>t   and   manaKcment -      1  ,      , 

KiVavmtiit    of  capital i...  .).i,imiii 

Total  national  debt  service-.  c^:!.'-!'"."""' 

Road  Improvement  l"und i  o  .  nnn 

Favment-  Id  local  taxation  accounts,  etc.  ,'-"'! '11 1 

Otfur  Consolidated  lund  services I..(I(..(mm» 

lotal  Consolidated   I-und  servici  ^  i.;  n:i,i  into 

-     .-uppiv  services  .    .v  w  -  noo 

.^rniv   I  includint;  ordnance  factories'  i-  ': ,  .^'.""' 

<^-_,,^-^  .)1,.).)UOOO 

Cjvd  services  ■■■■■!  I."" Va>;H.i;noo 

iieduct    ditTerencc    between    supplementary 
estimates  allowed  for  and  those  actualK 

presented     '" .o,.-.-,  ,,on 

Customs    and    Kxcise    and     Inl.inf!     Kevcuie 

departments i    l.-Jl,(li)i) 

Deduct    supplementary    estunate    not    pri 

.cnted  _   «0."0«  t.74l..)iMi 

Post   office   service^ Ji^iiJ:,*.""" 

Total   supply  services  £  iTo,2s>*.o.>() 

Total    expenditure  .j  jii„  !._-4,o,ii» 


riir.  w  \K  luix.Kt- 


To   <itY--ct    tlie>e   estim;itc->   tlu-   (.'liaiut 
rrvciuu-,  -li;,'htly  lar-iT    at  £-'1.7.1  t<;,ii(M». 

ESTIMATED  NORMAL  HFVENUK.  I'll  ! 

<  intiims  ami  txcise 
I -''and  rcvc'uc 

Total  ^rCl■i■t^   I'rom  taxts 

Post   office   service- 
Crown    lands. 

Krceipt'i  from  Suez  Canal  shares  and  Miiulry  loan* 
Miscillaneous     

Total  receipts  from  nontax  r"venue 
Total   revenue 


r   otiniatcil    a    t.ital 


a  7.'..;t,'iii,uoo 

iMi'oHi.UOO 

ti:i..ltHi,(MMt 

£    :il.T.'><>.0(H» 

."i:tn  Olio 

I  .(To  000 

■J.  I, ■«).(«>(» 

t  ;t:),7H0,tMm 

I  Jii     1  Hi  OHO 


Reforr  the  last  iK'acu  year  clnscd  there  was  a  tlfp  "f 
£l  l.;!:.(i,(MMi  111  iiic'ime.  sn  tliat  the  Treasury  fateil  a  deficit  "i 
iiearlv  tli:it  Mini  when  Ma'-ch  •".  1 ,  ivll.  was  reached,  '"onse- 
(|nen!l\-.  ulieii  \.l<\i\  1  le-rue  iire-eiiti-d  the  tir>t  hiido^t  t. 
mem  in  Nnvt'inKer,  lie  had  h>  take  care  i«t'  nearl\-  il  L'.noD.Diii 
left  "ver  from  the  previ.'Us  vear  in  ailditinn  tn  the  new  hunleiis 
the  war  had  thni-t  ujxin  the  Treasury.-  His  previous  Inidiiet 
ci'titained  nianv  pr. ivisi..n^  fur  social  refcnus  and  the  .lUtl'-ok 
as  itieasiired  l>\  the  returns  pmniised  well  for  the  new  proposals 
of  the  (hancellor.  'i'he  war  shattered  these  Iiojr'-,.  reduced  prob- 
able revenue  and  em]iha  i/ed  the  necessity  of  a  new  statement 
ind  an  earls  acceptaiici'  of  more  radical  tavatiou.  not  for  reiorni 
Inn  for  war  pr.rposes. 

T!ic  C  h:iiv.-c1'or  prepared  his  auditor.^  for  the  lieaw  hand  of 
war  e\[)enditure  by  recitiiiLT  the  fact  that  the  hit,diest  co,.,i  ..f  war 
,11  the  )iast  for  a  sin^U-  year  was  171.0011.(11111.  I'he-  estimate 
for  the  lirst  \ear  of  this  \var  wa-  jdacod  at  *  l."i(i.niHi.iHio.  ;i  ^cm 
too  lar.<:e  to  raise  by  taxation,  th-nuh  in  I'-ilT-l-^  the  revenue 
from  taxatim  reached  tHKl.oon.ooii.  (^',  .ntinuini;,  he  stated  the 
I'rench  wars  had  cost  t^:'.  1  .noo.ooo.  ,,f  which  £ !  lo.oim.ooo  ucre 
raised  bv  taxation.  The  national  income  of  the  country  in  Pitt's 
(la\  was  estimated  at  iL'.'O.ood.ooo  and  was  now  placed  at 
£j,;;oo. 00(1, 000.      \\-  therefore  urfjed  tliat  a<  much  as  possible 

'  l.:iw:on:  Hrilish  II  ar  /•  injur.  .  1HI4-15,  pp.  •iSS.2S9, 

'  Fiir/t(7)»!.-i;f(.'rv  Pibarrs.  H.  C-    XovembiT  IT.   UtU. 


2S 


Till;    K.NANCIAl.    HISTORY    OF    GRi.AT    I'.KITAtN' 


■.liMuld  l)c  pp  •,  i.k-i  hv  taxatinii.  cxprL-^Mii.u'  the  hopu  that  the  war 
will  l.rin.n  a  i:n.'at  ri.'iluctii-n  in  arir.anK'iit-  wj-.cn  it  i-  c .nchuled 
ami  the  u.t1(1  j,'cts  annnwl  to  survey  the  havoc  done.  He  m- 
t.  nue.l  the  Ih-u-e  that  the  pension  li-t  vo'uld  he  incre.isecl  hy 
ild.nuo.iiiio  aiimialK  ami  he  a><ureil  nieniljerr-  that  even  under 
thecirenin-tanee-  the  --vernineni  wmuKI  levy  no  taxe-  that  wuuld 
nitiTt'ere   \'.  ith  priMlueti\e  industries. 

Thi-  \\a<  the  >pint  m  which  the  c;ha!:rel]or  .•ii>i)rMaclieil  the 
pr-il.Icni  ..t"  war  linanee.  Hi-  hr-t  pr^  p--al  wa-  t..  d.  aiMe  the 
UK-nnie  tax  then  standing  at  '.'d.  I'liearned  inec^ine  was  t-.  i)ay 
..ne-tMrtv-ei,^hth  tnr  thi-  \eav  and  ..ne-sixtecnth  iie.xt  year.      1  he 

•  lonhle  t.ix,  JT.wever.  .mly  fell  nil  the  tax  paver>  for  une-third  ot 
the  year,  Decenil.er  1,  I'.'ll,  to  Aprd  1.  I'.'l."..  winch  meant  ( me 
shill'in,^  >'U  the  '.'d.  da-  and  Is.  ^d.  f.  ir  the  re-t.  The  lnl;ni<l 
Uevenne    !)ei)artnient    under    thi-   iJrMvi-i.'ii    exiiected    t' >   collect 

til. 1,(1(1(1  ,,f  additi-nal  inc-nie  tax,  .and  £l.-..iui(i.(i(i()  under  the 

Mipertax.  Xext  \ear.  1'.' 1  .".-1  ■;,  the  nic-nu'  tax  wa<  ex])ected  to 
produce  £;;^.T.-.i' ooo  and  the  supertax  t'-.,oiHi.oo((  .adijitiunal.  .an 
UKTe.a-^e  '■(  £U. 000,000. 

The  Chancellor  .ai)proached  the  prMhlein  .-i  nalirect  tuxe.>  \Mth 
Ic-s  cntideiice.  The>e.  he  siid,  were  alway>  h^rne  uneciiially 
.and  pre-ented  li.-cal  proMeni>  "f  ^reat  dirticulty.  1  ie  jia^-ed.  !.y  a 
t,ax  (.11   V,  a,ye-.  th(iU.L;h  it  practically  liecanie  ,a  war  niea-nre  later 

•  n  when  the  inccine  tax  e--ein]Uii'n  was  Inwered.  lait  heer,  tea  and 
toliacc-  did  reiire-ent  iio^sihle  s-urce-  1^1  mcMnie  that  c  .u!d  in't 
hf  overlo.ked  in  a  natiMnal  enur,uenc\.  The  -tate  n{  the  heer 
tr.ide  wa'-  n.it  .all  th.at  cniii-a  he  a-ked  and  -"nie  caice—i-n-  111 
license  fee-  should  he  made  \>i  attec-  ihc  reducti"n  in  h^'urs  ut 
l>u<me----  caused  hv  war  ..rdcr-  and  the  Sc-tti-h  Tenijier.mce  Act. 
it'  the\  were  .i^dveii  a  c  ■ncessmn  el  .'ne-t'iiUenth  'it  the  /.cense  i^r 
fvc'rv  licur  if  reduced  husincss  time  <h  \\n  t"  ..ne-t-Mrih  .0  the 
license  p;i.\nient,  the  C'-t  t^ '  the  ijMvernment  w  uld  he  tl.'.n.ooo 
in  lessened  inc-me  the  first  year  and  £."..".0,000  th^  f.  11  .win,-  year. 
If  heer  were  chat-cd  .-n  a  sjiiril  basis,  the  tax  w.^ild  am.  .unt  to 
JTs  10,1.  ])ir  harrel,  hut  the  tax  wa-  only  T--.  '.'d.  It  was  neces- 
sarv,  h.'wever,  t.>  phra-c  the  tax  in  -\wh  a  wa_\   as  to  iiermit  it 


TIIK    UAK     Hl"l)t;F.TS 

till   T'  ii-iMiKT.  .iml  thi-  C'lulil  !><■  il'^m 


L".> 


i\-  ni;ik- 
'rakiiiL; 


mi;  It   'jil.  "11  tlif  '  !K--lia!i  imit  <  r   IT-.  :'.(!.  per  liarrcl. 

into  cmisiilcrati'  n  tlit  license  concession-,  tia*  return-  I'r'-in  tlie 

leer  tax  t'nr  the  nnianider  'M  the  \ear  Av-vU  hriii;,'  ti'.(>:,(i. t 

and  next  year  £l  7,n:,(i.(i(i(i. 

•  Somewhat  lacetion-ly.  ilie  C'liancell'T  jirMju-ed  the  tax  ■ -n  tea 
under  the  cajitidii  of  "  C'atchmi,^  the  I'eetMtaler."  '  a  liad  imn  that 
tiad  n-  s, )])()rilic  effect  neverthele— .  lie  didn't  tliink  ther.'  C"u!d 
lie  a  p;raduated  scale  ■ 'U  llie  ha-i>  of  (iualit_\ .  and  he  therricre 
proposed  a  -tra;j,du  iiicrea-e  "f  ■'•t\.  "U  the  piiund  "ver  th.e  '«\.  tax 
that  had  prevailed  since  the  reduction  ir.rin  ''A.  t"  '"\.  after  the 
l'..ier  War.  He  h"i)ed  t"  i;et  t'.'.'.n.niio  f,  „-  th-'  \e.ir  and  £:;.L'nii.- 
oiMi  lor  tlie  following  \e,ir.  Ihe  lax  "ii  wlii-kie-  and  wines 
remained  as  het<  re.-i'H'e  it  had  ]ir"iluceil  Imt  hltle  re\enne  the 
prexiou-    \ear    and    an    ad'ie!    tax    wa-    "had    i^r    the    trade." 

Tobacco  was  pertnitted  to  .-taiid  a-  it  wa-. 

Idle  f.'-st  war  hud,i;et  wa.-  '::rafteil  mi  a  peace  hnd,i,'et  an.l  the 
remarkalile  thin^;-  alM.nt  it  wa-  that  it  ili'l  ii't  inchid.e  a  -iiifjle 
new  tax.  d  he  proposed  expenditure  were  !■>  re:i(.di  £.">'l.' 
with  a  revenue  (jf  £l' 1  l,-".ni,(iOn.  lea\  iii.u  £■■;_  1.:'.- l.nnn  f 
mwed.     dlie  .■-ituatioii  thu-  -'"od; 


)<:  l.ii-.r- 


R?TIM.\Ttl)  UK\-E\Un.  HMJ- 


(.'u-toms  ami  excise 

.\(ld 

.Xdiiitii'iial  tea  iluty 
.•Xd'litinnal  beer  duty 

Lt5« 

License    dutv- 


■_\,')lliMIIMl 

£:i,t.",ii(i(M» 
4.')(1  (MIO 


n  .t."}!!  (Kill 


HOdiMKiii      e    74  :i,")iHi(M) 


l:ilaiid   revenue 
.Add 

Proposed  increase  of  iiicnme  tax  and  -upff- 
tax 
Total  receipt-   from  taxes 
Total  recciiit-  from  n.iiitax  revenue 

Teital  estimated  revenue 

Deficit  to  be  inade  Rood  by  borrowi:.^; 


■  :i  iilii  liuo 


\.'.  .'lOII  I II II I 


liil..")li;.(i(io 
tl7.").siiiUi()(i' 

.•!.")'-!  lili'dilO 
£JI  1,-J'.til  0(1(1 

;!-2l':i-Jl'(i"" 
£.'i:!_',i'.  17,11110 

'  For  the  discussion  of  these  points  see  speech   of  Lloyd  George,  I'jrlia- 
wir'i'flfv  Pchdfrs.  H.   C.  Xovember   17.   1!M4. 

M.a\v^on:  n>i'ish  U'cir  rtnancc.  1014-15.  pp    JIU  ami  -^''-J. 


I 


;}0 


THE    riNANCIAI.    lIISTnKY   OF    CKLAr    UKITAlN 


Other  features  of  ilic  Inid^et  >uch  a.-,  loan  [jwlicy  annuities  and 
sinking  fund  v.dl  he  left  fnr  rnnMileration  in  the  chaptemn  loans. 
it  is  \v(jrth  while  to  .u'ive  hrief  i-on-idcration  to  coniempMraneous 
opinion  on  thi>  uar  nudi^et.  Hi.  Lco>un>ust  -aid  it  wa-  u  Imd.net 
of  nil  noiisen-e,' 

There  i-.  U"  dnd^iui;,  n-  attenii)t  to  impor-e  taxe-  which  will 
he  pn.htahle  to  eeriaiu  iiuere-t~.  and  thereiore  poi-ular  uith 
a  section  of  the  oanitrv.  \ve  are  inclined  to  think  fiat  the 
.implicitv  of  thi-  hud-et  ha>  a  nia>Mve  merit  to  which  a 
mnre  rehned  and  elaborate  -^  heme  could  not  i)reten<l. 

With  a  s,,meuhat  ni.-re  critical  view,  Mr.  W.  R.  Law^ou.  a  well 
kno\w-i  financial  writer,  --aid. 

h  the  llou-e  of  Common-,  ha-  imacticallv  -hut  it-  eves  to 
the  terriilc  expenditure  t'lat  i-  i;oin-  on.  and  weaklv  accepts 
the  Chancellor's  allu-ion-  to  the  million-  on  million:,  that 
will  have  to  one  day  he  jirovided  hv  the  tax  jiayers.- 

How  far  th.e  cou-en.'^u-  of  .  ipinion  wa-  from  the  acUi.al  cost  of 
the  war  i-  well  >hown  hv  the  -tatemeiit  that  it  would  take  a 
billion  ])ounds  to  thiance  th-,-  war. 

Tested  hv  the  actual  fumre-  for  the  vear,  thi-  hud.c;et  co.n- 
formed  more  nearly  to  the  e-timate  th.an  any  of  the  war  hud-et.-, 
with  the  possible  exception  of  the  McKenna  hiid-et.  d"he  total 
receiiit.-,  wei      £-J-J7,."''."'.<"i",  neces-italm.L;  vote-  of  credit  to  the 

extent    of    £::."'T, ■•'"'"    "r   ahout    i;;ii.i)i)n,i)oo   more    than    the 

Chancellor  re.t,'arded   a-   nece-.-ary.' 

Tin-.  Sf.cond  War  IjrnoKr 

Wlien  l.lovd  Ccorue  iire-ented  his  .-econd  financial  st.atement. 
Mav  I,  1 '.'!.".,  lea.lm-  to  the  more  elaborate  con-ideratioiis  of  the 
hiul,L;et  re-iun-ement-  later  on,  it  wa-  no  l,,n-er  po>-.hle  to  clis- 
tinsui-h  hetv.ecn  oi,!niary  jicace  exi-eudiUire  am!  exiieiiditure 
ujion  tlie  war.       I'he  co-t  .if  army  a.iul  navy  wa-  to  he  carried  by 

'  l.n.id'H  Economist.  Novciiihcr  lil.  _r'14.  j,.  'M\,. 

"■  Lawson:  nrUish  liar  /  iiuiiu.-   l'    -'  ' 

'  /,)ii(i,>M  /:"c"ii,i.nii/,  N.'veinbi-r   I'i,     ini  ^ 

•RcvctUR  aiKi  Expindituro,  W  lute   Paper,  H.  C,   .\o.  K'.',  July   -l   l.'l'. 


n 


THK    WAR    UrnCKir 


31 


votes  of  creilit.  On  the  ;i--iiniiiliMii  that  there  \\a^-  t'-  he  -ix 
moiith?  m^re  nf  war.  the  t.  tal  expense  w.'uhl  appn.ach  £^00.- 
(»0(i,()00,  if  it  ci-ntitu'.eil  \>r  a  year  th.e  C' -t  w.'uld  l;''  X"  i\.\-'<<'.- 
.i:;4.niii>,  xvliieh,  it"  reiluee.l  l)y  tax  income  w.-ald  leave  £^f,L>.:!22.- 

I  tM  he  iinanceil  hy  h.  rrMwin-.       'Ihe  returns   fnan  taxation 

sh.'we.l  wniuleriul  hiM\aiiey.  The  full  yieM  "i  the  incme  tax 
attrihntalile  t^  WW  wa-  £K. '""',""".  htit  tlii-  un<h.r  tlie  new- 
taxes  .,t  X.Aemlier  ua>  expecte.l  'n  reah/e  £.v;.ooo.unn.  l:,.,t 
aetuallv  hr^Mu-ht   £:.'.M'7",noo.      The  same   -t^ry  hehl    l^r  ^ther 

taxe,-^.     'I'he  Supertax  hmu^iht  nearlv  £l',i>h(..i mnv  than  was 

estiniateil  am!  the  nnml>er  n\  pa\er-  increa-e.l  t"   l-,'"'"  '.Mth  a 

ppTa1)iHtv  Ml'  -..m-  !•>  !■'>. '.      'Ihe  cu-t..nis  and  exci-e  ho 'light 

£'.i:..L'7n,o(H),  (T  an  increase  "f  £l:;.i'.7."..'>"n  ,,ver  tlie  receipt^  uf 
the  previous  year.      Land  vahie  dutie-  hr..ui,dit  in  hut  £:;.'itjHio. 

The  ti'tal  tax  revenue  in  consequence  went  :>■  £:i:'."',7iH). and 

the  tntal  nontax  revenue  aniounte.l  to  £:;4. •'••■-'."""  "r  a  t.^tal 
revenue  of  £-J7<i. :;:!-, '»""■  I'^y  su-peniUnfj  the  -inkin.^  fund  pay- 
ment for  the  year  to  th,e  sum  of  £:;,7>'n,()0(i  and  deductmg  the 
advances  made  t..  the  Alhes  and  '  ionnnion-,  in  amount  £.'L'.:Mn,- 
ooo.  tlie  cost  of  tlie  war  for  an  :.  tioual  \ear  wouKl  he  tl.i:):.',- 
Ci.'i-i.onn  ,ir  tiM'Hi.ond  per  day.' 

\  cliani,^'  of  view  reizanhuK  th^e  cost  o,f  war  r.apidly  -amed 
he.adwav  not  only  as  to  the  hurd-n  hut  a>  to  the  metliods  uf 
tinancinj;  the  war.  The  Chanceh.  r  oi  the  Kxchefiuer  was  evi- 
dentlv  satisfied  to  let  the  ia\e>  of  '"he  jirevious  Xoveniher  st;.-id 
as  the  liasis  for  the  revenue  of  the  year  and  a-  the  hud.i^et  -tood 
in  Mav.  r.'l."i,  it  was  the  purpose  to  let  the  rates  then  proposed 
stand  for  the  next  vear  of  the  war. 


The  Ttiirii  W.\r  HrnoKT 

In  Tune.  IIU:.,  Idovd  T.eor.Lje  was  succeeded  as  (.Tiancellor  of 
the  I'xchequer  and  the  energetic  Comm<mer  hecame  Minister  of 
Munitions,  where  hi-  great  admini-trative  ahility  -liowed  more 
brilliantlv  than  it  had  in  his  second  budget.       ddie  new   Chan- 

'  For  stateimnts  in  this  paragraiih  st-t   I  he   Tiir.is.  May  •'),  liH.i. 


:'.!) 


TIIK    I-INANlIAI,    ItlSTOKY    OK    r.RKAT    liRITAlN 


cull"!-.  McKcnna,  . -inniciitui.L;  uixm  the  war  C">t  tlie  I  i-t  of  June 
.slinucii  that  the  war  e.\i.eii>e  ha<l  ri-en  to  t:;,oiH),iiuii  jrt  day.' 

The  main  oli-orvatioii-  we  wnulil  inak  ,re  <  1  )  tliat  the  new 
taxation  (uhicli  was  overdue,  as  -nowti  liy  Mr.  Lluyd 
Cieor;,'e'.s  linaneial  >taienient  at  the  bcKUinin.i;  of  .May)  is 
.still  overihie.  i'ud  i  i' i  that  ecuuoiny  in  the  widest  sense, 
])uhhc  and  jirivaU',  has  not  U-en  pas>ed  from  talk  into 
action." 

And  the  same  journa'  in  commenting;  on  the  only  real  advance 
made  m  taxation,  tlial  proj.oscd  liy  Mr.  McKemia  m  the  follo\',- 
in<'  Sei>teml)e-.  said.  "  I'he  iirt-enl  war  hmUet  is  hc-Lited,  hut 
not  inadei|iiate."  ' 

It  is  ;in  historic  :md  picturesque  scene  which  The  Tunes  pre- 
sents in  the  follow  in-  para;.:rai)hs  : 

The  tkior  of  the  ilouse  of  (.■ominons  was  crowded  for  the 
Chancellor  of  the  h;xche(|uer'.s  luids^'et  this  afternoon,  and 
members  oversowed  into  the  -alleries.  I'wo  former  I  lian- 
cellors  of  tile  l-.xeiie(|uer— Mr.  .\s(|uith  and  Mr.  Chamhei- 
l;i,„ — ucre  present  to.  hear  Mr.  .McKeima's  tnomeiitous  i)ro- 
p,,s,ils,  but '.Mr.  Lloyd  C.eor^e  was  absent.  Idiere  was  a 
l.arL^e  attendance  of  peers  in  their  i^allerv.  and  tlie  public 
fjallerv  also  was  (|uite  full.  Mr.  Mclxenna,  who  rose  ,it  ;i 
(juarter  to  four,  was  able,  without  haste  and  without  lack  of 
precision,  to  pack  liis  businesslike  speech  ■  !thin  l'>  minutes: 
and  when  he  resumed  his  scat,  coii^rratid.uions  which  were 
adilresscd  to  him  were  based  ;is  much  upon  his  luciditv  as 
upon  liis  brevitv.  The  speech,  in  fact,  was  ;m  orderlv  pro- 
cession of  intelli.uible  and  almost  expected  t'lLiures. 

Idle  revised  estimates  for  the  current  vear  put  the  revenue, 
on  the  basis  of  existing  taxation,  at  £l'7lM  H',»>ihi  and  the 
expeiubnu-e  at  £  I  ..")'.hi  noii  and  the  dead  weight  of  debt  .'it 
the  close  of  this  vear  would  be  tL'.-.'do.ddd.niiO—nududinir 
.advances  to  our  allies  which  would  be  repaid.      "  1  here  is 

if  ;i  nation  haviiiii  volun- 

hiL;h  ,1  proporti<'n  to  the 

total   national   income    for   which   iirovision    is   to   be   made 

within  ,1  siu'de  ve.ar."      Without  undue  delav  he  ))roceetled 


no  re':i'rd."  -aid  Mr.  McKenna, 
tarilv  accepted  liabilities  bearing  -^ 


•  Til,-  Times,  bilv  :5.  1'*1V 

■  Ihui  ,  Slptfll'lHT   -•''     I'M.i 


l^:i 


rilK    W   \K    lUTH-.KTS 


:',:$ 


t(i  (lf>crilK'  the  inca.>urr 
£H)7.(i(Hi.nit(i 


which  arc  t'l  he 


taken  I"  iimvide 


new   taxation 


le   incmne 


tax   i>  tM 


inerea-ei 


111  ner  cent, 


the  exenii)ti.'n  limit  is  to  l)e  reihicetl 


from 


i\i;n  \. 


and  from  tl.Mi  an.l 
Sche-hile    !'.   i~   i"   h 


;in<l  the  ahatement-  tr.'m 
tliin  til  iliiii.       The  a--.e' 


£|(;o  tu  tl-" 
-nieiit  \inik-r 


taken  as  the   rent   panl  m>tea( 


1  1.1    a^ 


() 


ne-ihi 


r.i. 


aMiiciil    " 


t    inc'ime    tax    \vi 


11    he    accepted    in 


certain  ca-e 


-e-  in  in-talment-. 


Mr.  ! 


( ici  'VJ.V  - 


nulu'et  \va- 


lip'  in  the 


-upp 


there  WMuM  he  £  1 .1  :.-'.'■■■•  I  imh 


I  t'l  rai-e  and  relvmi;  uj 


,)iin 


•;itiiii.  that 
the  taxe- 


alreadv  impose 


d  h 


e  aiuie 


d  tw- 


dditiiins  I't  voles  on  \\me>  and 


lieer-  ca 

>itnation 
h\-  telliii; 


Iculated  to  ,)ro,h;ce  £:!,.>(M),i.n(>. 


A  new   -urvev 


if   til 


in  Sepleinlier  can- 


Mr.  McKenna  to  ^lartle  t 


he  Ih 


ui-e 


It  iliere  ua- 


£1, 


(MMMMiii  to  l.nd  |i  ir 


lie  h-cal  vear. 


It  has  already  heeii  diown  that  he  propo-,c 
income  tax  hv    in  per  cuit  and  the  exemption 
I'ul  in  addition  there  \\a-  to  he  a  sj) 
."iH  |)er  cent,  ;in   increa 


-~ed  an   increase 


>f  the 


i\\  erei 


to  £i: 


cial  tax  on  war  jirotits  oi 


;e   of    ■>"  per  cent   ot 


th( 


tohacco.  c'lcoa,  cottee,  chicor; 


ami 


.Iri 


friiu-  ai 


ntie-  on  lea. 
d  on  motor 


spirits  and  patent  medicines  of  Utii  per  ce 
po-tat^e  and  -ix  ])enny  telcirrams  were  ah 


iit.     d"he  old.  halfpenny 
aholished  and  an  mcrea-e 


111 


letter,  parcel-,  teleiihoiie  an 


d  tele>iraphic  char;,^es  recomme 


nded. 


"ri  iin  tlie^e  new 


lUrcc' 


he  hoped  tn  get  an  addition  i 


.f  £:'.L','.ii>i.- 


(111(1,  whic 
income  < 


if  £: 
h 


■d  to  the  existins;  ha 
Id.diHi  and  a  tot; 


ds  of  taxation.  provuleJ 
if  £:'.(i."i.(il  4, Olid. 


an 


W  hen  the  nati 


mal 


ha  lance 


sheet  of  the  vear  was  s 


truck  thi. 


fmanci.al  statement  allpe.lr^ 

Navy 

Army 

External  advanco 

Pre  am!  pc-t  moratorium  bill> 

( Irdiiiary  national   services 

l-'ood  supp,.es,  minor  items  an' 


as  follow^ 


lltKigt 


£  l!!i|  noil  'm(( 

7  '  .",  OOII  (MM) 

-)_':( (1(111,(1011 

:',i;  (KMl  imki 
17(1  (10(1  000 

.-)H'|.(I0'()I10       £l,")',Hl,(mo.l'ilO 


Revf.nuf.  S.\me  Plkmi' 


On 


eMstin 


iii  basis  of  taxation 


Cew  taxation 


Revenue  from  postal  cliarce^ 


imatici    drficit 
'  Thr  T 


Diu-s.  >e 


ptei.'ht 


i:il." 


ri.iio.iKio 

:;o''ij4.(i(io 

1  '.I-.0  00(1 


:j(.l.')  (lU  000 


£1  28:)  .(114,000 


;]i 


rHK    I'INWCIAI-    HISTDKY    dl"    (.RKAI     HRll  AIN 


Great  a>  was  tliir.  deficit  there  was  Ih  1  c  ail^leil  t'i  it  tlie  ileticit 
fnun  last  March  a;ii"'iintin,L:  to  £:!;".  I, iiiki.imm)  ami  al-.  i  the  pre- 
vious (leht  <'i  i'i.'i  l.niiii  niH»  :,,,  tliat  the  net  deal  weii:lu  nf  nati'iiial 
inilel)teiliie"  wniili!  -tand  at  ii'.Juo.iMiniHiii  \],nl  1.  r.M'i.  l:i 
the  face  "f  .>uch  miui--  tiie  >ur])ri>e  "i  t!ie  Iniduet  \\a-  the  co'ii- 
parativelv  small  aiimunt  ■>i  new  taxatiuii.  While  the  t.ilal  yield 
1. 1  taxes  eventually  involved  heavy  sacrifices  u  liid  nut  fall  upon 
the  tax  Jiayer  untd  the  f.  ill  .\\  in,:;  _\ear.  I'here  wa--  .-'-me  ha^is 
Imi"  the  remarks  of  jlarl  >t.  ,\ldw\iie  when  he  replied  to  criti- 
ci-nis  of  the  hmlt^et  that  the  hill  duaild  have  tjjonu  farther,  hy 
WiyiiiL;. 

More  indirect  taxes  shnuld  have  heen  levieti  ami  the  j^ovem- 
nient  was  to  lie  critici/eil  in  the  delay  in  in!i)osin;,^  new  taxes. 
The  <jo\ernnie'it  was  al\\a\s  tuo  late  in  their  actions.' 


d'he  liuduet  f.  >r  the  '.ear  ended  March  :'■  1.  l'.'!'''.  was  reinark- 
ahle  in  >Mie  ie:-|)ect,  at  least,  fur  U  was  ihe  unly  i.ne  of  the  war 
l>ud,i;ets  that  actually  came  within  the  tii;ure-  ~ul  initted.,  sinee 
the  exp,ense~  were  £:;  1  .(hhi.ihmi  le--  than  the  estini.it'/il  amnnin. 
dhis  fiirtunate  result  wa~  nidre  api>arent  than  real  f^  ir  it  was 
expected  th.it  i  1  ■_':;. nni i,ih)(i  \\,,uld  he  advanced  tn  the  Allies  and 
1  iMiiunii  ills,  ;ind  liiilv  t-J  1  ii,oiii»,i  mo  were  -i  i  -\)luI.  Wdieii  it  came 
t' I  the  new  \ear,  the  (  lianceHMr's  staienient  called  f"r  a  ti 'tal  of 
ti,s^',-,  (iiKi.udu  ,r  £:;,",o.iMMi,(inii  nvTe  than  the  }ear  hefore. 
This  sum  ■  ni  a  lay  h.asis  moved  the  coist  to  an  e\  en  £.".,nou,(Hi(i. 
ddie  war  ser\-iee  was  to  co-^t  £l  ,1  ijoniio.iiuii,  miscellaneous  ser\-- 
ice,  £:;ii.(iiM).(),i(),  aMvance<  tM  Allies  and  n.iniinions.  £4:ai.n(ii»,- 
oiHi,  tin.  ('(insDlidateil  I'und  serx  ices,  interest  dii  the  puhhc  deht, 
ami  incidentals  connected  therewith,  £l:>..".mi,i)iMi,  the  Ci\il 
Service  £';o.o(ii..(hmi,  and  tr.e  p' 'st  uft'ice  £-J7.i>no.O0('»,  From  the 
excess  profits  tax  it  was  h^ped  th.at  there  w.  luld  he  £^i;,<it)(i,ili)0 
ami  .'ther  t.ixatioii  w.-uld  hrnii,^  £  1-_':I,oimi,i)im».  In  these  tip;ures 
was  an  increase  of  £'.i:',,imhi,ii()i)  ,;ver  the  tax  returns  ,,t  the  ])re- 
vii'Us  year.  makiiiL;  ample  prdvisinn  for  interest  un  deht  and  sink- 
iu'j^  fund. 

'  l\irlu!inciitjr\  IJrt'ijt.-s.  11.  C,  December  -1,  H'lo. 


Till,   UAK   I'.riir.j-rs 


Tl'a-  new   t;i\   prop, 
inci  lUf-  varviii^'  fr. 'in 


cailc 

(1.  tn 


1    iiir  a 


:luui 


m 


in  inciimc>  c\ci.i.' 


the   rate 
lin-  t.',:. 


nil. 


.\innM.-nient>.  r 


riilwav  ticket-.  ni;aclie-,  nun 


ral 


uator.  Ill'  't'  >v  oars 


aiu 


1  cxclf-,  and  motiT  -pint- 


111 


additii'ii  t"  added  taxes  .  ai  >u^'ar. 


ia,  C'lffee,  and  exce.--  pr. 'ih-  t'l "lined  part  ni  tlie  revenue  \ 
Main  lit  the  defect-  in  the  exce.-^  jir.  itit- 


ilaii- 


i'  th.e  new  hiidijet. 


\\  ere  c 


■rrected  and  the  rate  rai-ed  tu  >'>'> 


:r  cent.       lliere  w, 


temiii  in  the  Imd.^ei  ti.  jjrevent  c  iii-nnipti' m 


at 


result- 


kixurie-. 


rn  '111  tile  taxe- 


laii 


lhi>  'indj.;et  were  expected  I"  pr^ 


dn 


ce  the  re-n 


Us  shnwn  in  the  tahle  lielnw 


IncnnK'  tax 


aiUlition^ 


E.scos   profits 

.Anui-errtiit-  tax 
Railway  tickets  tax 
Sugar   tax   additions 
Corfte.  C'lCna,  chicory 

Matclus    tax 

Miiu-ral  watcrN  cider  and  ui' 


ir  cars  and 


.1,'  null  llllll 

SiijMiiHiiin 

,~)  1)1111  niMI 

:('iMiii  null 

7  oiHiiiiiii 

1.1,.'.!  I.I  II  II  I 

j'liiMi  mill 


£l.-,ll.-)l(Ulll() 


Th 


0  cnninient.-  <>n 


thi-  lnid,L;et  were  inure  la 


aviirahle  than  th' 


inaile 


11  I 


t-  predece-siirs 


It  wa.-  a  hnd<ret  of  hiiiie-* 


irkniaii- 


diii 


-avs  line: 


Will  it  cau-e  -acritice  tn  lie  tran-terred  irnni 


rheinric  to  actimi 


Ian 


.-avs  another 


.\  reiire.<entative  from   ire- 


irote-ts  atrainst  the  Inidget  froiii  I.ei,Miinin     to  end  a-^  re 


lated 


to  Ireland  holdin.L,'  that  Ireland  liecau-e  of  it-  -pint  in  niitactnre 


was  indefeii.-ihlv  taxed 


heen  iieavier  taxation  mi   lari;e  incomes 


wniie  ' 
Ian 


dh 


er.- 


noucn 


t  t  lie  re 


^lloU 


d 


tiave 


it  i-.   however,   the 


first  time  the  income  tax  ha 
earners,"  declared  Tlw  I'iiiu 


jen  extentled  downward  to  wage 


The  FiirRTft  War  Budcet 

Without  question,  the  McKenna  budtjet  was  the  greatest  of  the 
four  war  budgets  up  to  April.  I'.'ls.  Before  he  was  called  upon 
to  present  another  one  the  ministry  was  changed  and  Bon;ir  Law 
succeeded  to  the  portfi  lio  of  the  Treasury.     The  attitude  of  this 

'  F,  \V.   Hirst.  London   Icor.on'.ist.  April  >-,   1'->I'J. 
=  Thr   Times.  .Xpril  •''.  I'-'lti. 
'Ibid..  April  •;.  I'.'IO. 


:u; 


Till.    riNAXCIAL    HISTORY    OT   GREAT    HRITAIN 


Chancellor  has  licuii  di-tinctly  a  iMTr^wmu  i)"I:c>.  X"  rely  upon 
the  taxes  as  they  stood  ami  tinaiict.'  the  war  with  vuto  nf  credit 
atid  exteiuled  horrnwiii^.  1  li-  rec^ninieiidatii'ii-  i^r  added  taxes 
were  almost  nej,di|L;il>le. 

in  the  face  nf  e\tra\  a^'aiice  and  iiitlatMii  t!ie  'iil''  cvre 
was  -urelv  taxatiiii  ^r  c  .iiii)nl-"rv  h.irrMwiiii;   which    ilnne 
c  iild  have  taken  >nn  ni  the  hand-  mi'  tlMu-^htle--  and  i^^nn- 
rant  penple  the  i>M'v\er  I"  uarji  the  ecuiiMinic  ener,iL;v  i.f  the 
conntrv   inmi  the  u.ir  u.irk  en   .'.liich  it  -h'Uild  Ik:  concen- 
trated.' 
Despite  thi<  and  .'ther  c. 'intnent-.  thi'tiL,--!!  the  adiled  pruvisions 
were  -li-ht,  ihe  hud-et  added  t.'T.ooo.oi lo  m  new  ta\ati..n  hy  an 
increa>e  >'i   1-..  lod.  , n  t'lljaccn,  added  rate^  < 'n  ainu-einent  tickets 
and  tile  increa>e  -if  the  exces-  prolits  tax  tn  ^o  jut  cent,     .\,L;ain-t 

the  increa-e  wa-  a  l --  "f  i'.Niii, \  thrdni^h   rrhate-  '>n  liipv.r 

lu-eiiM'  ihitie-.  leavin-  the  net  increa-e  I'l'i:.  1  onunn,       I'ln-  ihaii- 

cellcT  therefore  expected  to  -et  £.M::.''.on. i  ironi  taxation  and 

fc.s/.MH  1,1  Mill  from  additional  war  revenue  makniu  the  revemie  for 
the  vear  ti;:>.t',(tn.ooo.  (  )n  the  expen-e  -ide  the  national  deht 
service  was  to  cost  ti' 1  1  .."aio.nou  and  the  other  t 'oiisolid.ated 
l-'niiil  -erMces  £  1  1  .•">:'>"',ooo.  d'he  total  of  the  supply  services 
weir  estimated  at  £:'l',  !-•'■. ooo.  Addetl  to  the  co<t  of  coiiduct- 
im,'  the  war  £  1  .'.iT.'i.ooii.ono,  the  total  of  ilie  \ear  reached  £-.l".'o,- 
Hxlooo.  When  the  revenue  is  dedu.cted  from  tlii-  vast  sum 
there  was  leit  to  1,^  raiM'd  £  1  .c.:.  1 ,  loo.ooo.  These  are  enormous 
titrnrcs.  hut  there  was  hardly  a  ripjile  in  linancial  circle-  when  they 
were  made  pnMic. 

r.iulLtet  l'a\  passed  otY  verv  quictlv.  There  was  little  lohhv 
comment  on  the  s|ieech.  hevond  a  j^eneral  feeling  of  sati  — 
factii  n  at  a  ncf^ative  feature  of  the  Inuiget.  the  decision  to 
make  no  clian,i;e  in  the  income  tax.  The  view  was  mostlv 
taken  at  this  sta.i^'c  of  the  war  that  a  statioiiarv  income  tax 
was  a  -i.un  of  national  strefii^th." 

It  did  not  soem  desirahle  to  the  (.'hrincellor  after  considering^  the 
difficulties  of   scttin;..;'  nji  new   machinery    for   .    Ilection  to  levy 

'London  i:con,nnist.  M.iv  ■"'.  I'"-,  i,.  TtiS. 
'  riu-  Timrs    M.iv  :?,  HHT. 


iiir,  WAR   iu'iii;kt> 


37 


new  taxes.  Tin-  \>' )licy  ..t  adding'  ^'H' "HkIi  t. .  o .iiipen.sate  U .r  new 
changes  ari?in>4  imm  tlu-  new  Iw.rmwin-s  wa-^  cnnn-h  \"r  this 
year''  The  pre.lece-- r  of  Mr.  I'-aiar  Law  ui  llie  d.hate  ex- 
pre-etl  li;:n>cli  a^  learin,:;  that  it  w..ulil  lie  a^  far  Kchma  actual 
cxpentiitures  a>  wa>  the  la-t  l>U(lj;et. 


I 


-TIMATK 


I\i:VKNlI 


s  AND  I'riii.ic  Di:nT 


A-  an  acinal  fact 
.timate  made  at  the  ojienin^ 


tlic  l.ud-et  prMduccd  i;i>.nn,i  uuii  l„.x,,nd  llit 


es 

tnore  than 


.f  the  Iiscal  vear  and  tl:;!.'""*, 


tlu 


uid^el 


.f  I'.'p-.-r 


'idle   ta\   revenue   reached 


£tii:;.n(Mi,niiii,  ,,r  t'.i'.i.unn  uimi   mi  tc 


th 


m   ni 


the   I 


rc\v 


The  situation  is 


Lusttims 
Excise  ■ 
Estate  duties 


inwn 


in  tlie  l"ll(iwinir  tal'le. 


St;imp>      

Land  tax  and  house  duty 
Income   and   supertax 
Excess  profits 


,u-   vear. 


7i,-2i;i,ii<ii( 

as,;  7  J. 

:u'ti7t,iH'ii 
s  :i(in  (Mill 


■'  (i 


>  01 II I 


i:i!i  ."iim  (MM) 
:io'214',(»00 


£«li,: 


.  llOil 


1  he  pi> 
I'eni-  ] 
revenue 


St  office,  crown   lands,   --undrv 


irodnced    an    additional 


£'.>1. 


f.ir   the   year 
1 


£7n; 


fi.r  the  f^nr  tmancial  \ear 


r-  Anri!  1.  I'.'ll,  t. 


(.ans  and  nii-cellaneous 
I, .'ill."),  niakmi^  the  total 
'akin-  the  tax  reveinies 
il  1.  r.il^,  there 


-Mir 


is  an  a 
inc  nne 


mount  incliidin.u"  arrears  n\  possi 


Mv  ti-'oo.iHMi.ooii.  a  ta^ 


,f    £]  -(Ml  (iiMijimi,    whic 


h. 


wi 


th 


mC'  'UK 


sources. 


frmus   tlie 


lie   total 


.it    inci 


me    lor 


tlu 


fr.  .111    other 
i\e    mentioiifd 


jieru 


d  to  £iM'"*. """."' 


■11(1      <_".  ntiniiiLr  tlu-  time  t' ■  the  war  p(.rii 


d 


alone,  the  total  a^'irre^'ate  rev 


.-nue  received  .anioimt-  t"  tl. 


(HHMKiii  (,t    which  £l.." 4:i,<H((t,iMi()   w.a^ 


from   t;i\e>. 


I  he  t.ital 


jxpenses  during  the  war  per 


lo( 


1,  .\utrnst  1,  r.M  1,  to  April  1.  I'-M' 


were  £i'i,!Hil,()(i(i,()(Mi. 


I- 


r.  <m 


thi-  >uni  cen.iin 


,-ets  111  the  I'lrni 


of  advanc 


es  t(-i  .\llies  and  Dominions,  niunition  plants,  -liiiiiiuik'- 


etc.,  have  heeii  de 


ducted  1)V  the  Chancellor,  leavin.t,'  the  amount 


£5  000,«tOfi,(M)(i.      It   this  is  the  case,    Ml  per  cent  oi   tlie  war 


at 

cost  tiT  Cireat    Ih-iiain  has  heeii  pai* 

'  Parliamentary  Debars,  H.  C  vol.  100, 


from  revenue  ant 


per 


.ua> 


;;.  I'Ji; 


;;s 


Till.    riNANClAI-    lllSToky  OF   GREAT    BRITAIN 


cci.t  iruni  t.iM-.  In  this  cstiin.iti',  h' iucsir.  an  all' 'uaiKX-  'it 
nearly  £;'.(M).n(Mi,'iiMi  j>  made  f'lr  taxc^  in  arrears,  and  decliic- 
tions  of  j^mcrnu^  ani'aints  fur  laynicnts  f  i  Allies  and  U'liiuiinns 
are  taken  fn.ni  the  t'lta!  expenditure,  it  is  dit'ticuU  in  view  ui 
llie  inan\  tact'T--  invi'lved  t-'  reduce  i)a>inen;-  l>>  a  i)ercentaL;c 
that  mean-  ver\  much.  If  the  advance.-  t"  .\llies  and  D.jmniiciis 
are  retained  a-  a  part  ni  the  war  cnst  so  far  a-  fireat  l!rit;iin  is 
eoticerned.  the  a'-tu.al  am.mnt  raised  liy  taxation  i,  practiaill}  mie- 
fdurth  of  the  ani-unt  expended  during  the  war. 

'  The  Times,  .\pril  ^.  I'.'l-. 


n 


CHAPTER  IV 
Votes  of  Credit  and  the  Cost  of  the  War 


Thr  thcnrv  uii"n  \' 


iU 


;li  tlu'  I'lvl^i't  ])r;ictii.-c  "f 


unni"!!-.  1-  i>;i~(.' 


le  Trea^iirv 


<1 


niriniilak' 


tl 


\i-  ri-\  lew 


'U-f    "t 


,t  all  the  tran-actii'ii- 


jf  tl 


and  'lie  gained  thr. iir^h 


Till-  \\a>  a  prcci'iu-  lu-ritaije  <>\  the  (  "mm  n- 
f  adhcri-ncc  t-  the  principle 


oiiLT  vcars  (' 


i!     II- 


tiiiancial  respoiis 


ihilitv.     The  war.  however,  with  the  re 


([uirement-  <> 


i  secrccv  an-l  iiiahili 


down  'hi-  principle  n\  re 


credit. 


It  was 


iiece>sarv  m 


ty  t'l  foretell  the  cost,  has  br.)ken 

eview  and  sulwtitiited  f"r  it  the  vnte  "1 

.\u<ni>t  "t  I'-'I  I  t"  pi    -e  :■.  lar.i;e  sum 


t  tl 


le 


lispnsal  of  the  tjoverniiieiit  an 


tin-  was  done  m  the  eiiact- 


nient 
were 
an  ap 


.\    ihe  lir-t   V 


ite  i>t    ere 


the  1-iird-  of  the  Trea-iir} 


lit    tor  i.H 
rv  t"  thi- 


K  I  I  MM)   tlllll. 


aver>e 


.:ti"n  that  thev  i-sued 


in  the  form  ol  a 


minute  which  emphasized  the  nece-- 


sitv  of  "  iirocednre  h>  way  ot  supi 


lenieiiiarv  e-timate 


rather  than 


1 


V  vote  ol  crei 


lit. 


"hi-  vie 


lia 


,1  1 


leen  t'lrcinlv 


-tated  on 


i"eh 


ruarv    1  1.   !-">".  in  ='  re- ilu 
that 

Whenever  jiracticahle 

estimate- 


ti.,n  1a    the  >ame  l>ody  to  the  et'fect 


a   wa 


r  111  t  ])r'  i\ided   i>r  in 


•  nlinars 


hoiill  lie  provMei 


f(jr  hv  -upi>leineiitary  estimate- 


for 


he  armv  ( 


ir  navv,  as 


the  ca^e  mav  he 


and  not  In   vote 


of  credit. 


With  tlii-  hit  of  hi-tory  hefore  them 


the  I. 


in! 


lie 


rca-^urv 


nevcrthele-^s  felt  thenl■^e 


he-   iu-titied  in  view    of  the  enieri,'ency 


t' 


set  iqi 


:ain  the  me 


thod  of  th 


0  vote  ol   crei 


lit 


an< 


1  In  draw 


the  resolution  m 


the  '■  mildest  term-. 


the  prohlem  at  the  opemntr  ' 


wlieii  thev  came  to  meet 
.f  the  war.      In  previou-  m-tance- 


])ni  T  tl  >  1 
ono.  liut  now 


th 


,e  vote-  ot 


thi-  ch.iracler  rarely  e\cee(. 


the  C'omnion-  luu 


iue  act  uiveii  the  n 


,,imu,- 
dit  of 


c.xpen 


iliture 


1  ive: 


1  loo 


(MHMMiii  without  anv  estimate  ut  it.-  e.\- 


'  Trcnsurv  Minute,  p 


.\ugu=t 


I'.'li 


■id 


\o 


1  IV.WTIAr.  HISTORY  Or  GKrAT  HRITAIN 


ptiuiitinc.  r^' 1  iiiijiri^fii  w.ts  tiir  (.  1 'iiirii' ui-  uiih  tlic  wixlnni 
(jf  tliis  view  that  in  tin-  War  Loan  Act  it  K'avc  to  His  Majesty 
tlie  power  "to  raise  money  in  such  niaiiiier  as  the  TreaMiry  may 
think  (it  '  and  for  that  purpose  they  may  create  and  issue  any 
securities,  etc." 

1  hi:  \'ori-;  of  Credit  Desckihed 

In  the  resolution  of  liliiuary  1  I,  l"»"«o,  tlie  vote  of  creiiit  is 
dcscrilH-'d  in  this  way:  "The  House  of  Connnons,  in  fact,  dis- 
penses for  the  time  with  it-  power  of  control,  and  ;;rant-.  a  sum 
of  monev  in  gross,  and  without  the  u<ual  limitations  to  the 
Treasury  as  being  the  central  depaiiintnt  oi  imance.  to  which 
it  leaves  the  responsihility  of  distributing  the  money  in  the  man- 
ner hest  calculated  to  meet  the  emerj^ency."  It  i^  too  much  to 
sav.  however,  that  the  government  during  tlii^  war  ha-  given 
Parliament  no  inkling  oi  the  u-e  of  uioirs.  I'.xcluding  the  tirst 
vote  the  rrinie  Minister  or  the  Chancellor  of  the  l-".sche(]uer  has 
presented  to  tlie  House  an  elaborate  review  of  the  expenses  of 
the  war  and  tlie  progress  of  expense  by  reducin;;  the  amounts 
needed  to  a  da>  basis  for  easy  ciimparis.  .n.  The  detail  ..f  ex- 
penditure under  normal  conditions  however,  has  been  omitted 
\r<  m  these  statements,  and  the  House  has  not  l>een  able  to  eon- 
trol  tlie  <lesig!iation  of  amount-  to  war  puri)oses,  thus  nullifying 
one  of  the  fuiidainentai  fi-aiurcs  ,.f  the  l-'.iiglish  tinaiicial  -\-teni. 

that  ii.i  ajiiiropr'ation  -hall  lie  made  except  in  pursuance 
of  a  formal  e-tiniate  sul-.nntted  ■■v.  behalf  of  the  Crown, 
that  individii.d  niembers  have  not  the  ri^^ht  to  jiropose  ex- 
penditures or  even  to  move  the  increase  of  the  proposals  of 
the  Crown. - 


X'oxr.s  Oi-  Cri:i)IT,  r.Ml-l'.Us 

Tile  extern  to  which  tlu-  votf  of  credit  b.i-  been  carried  a-  the 
iiu-aii-  of  securing  ,nitli"rity  for  the  tinancial  conduct  of  ilic  war 
is  oiilv  reali/.ible  when  the  full  fact-  have  been  clearly  L,fr;\sj)ed. 

'  War  l.o.-iti  .\ct,  I'.'Il,  .'i  (ic.irKc  \'.  cliap,  ii. 

'  \\  lUouKhby :  Financial  AdiniHistratioii  of  (<r,Mf  Hntiun.ih  1 1'V 


VOTES   OF   CRKDIT    AND   THE   COST   OF   THE   WAR 


n 


Ik'KinniiiK  with  a  vote  of  /lOO.OOO.OoO  on  August  '■•.  I'M  K  tlic 
amounts  reached  as  hif^h  as  £.i.-,o,ouo  ooo  .,n  July  2:..  I'.MT.  Inr 
the  eifiht  ni.mths  i  '.iti^  March  :'.l.  I'.M:..  the  total  ot  v-.tes  for 
that  period  wm-  £:1.;l' ono  nn...  1„  r.M:.-!.'.  the  votes  anvumted 
t.)  £l.4-J0.<H»ii,(i(»ii,  reaching'  £l'."1"',imiii  nud  u,  tlic  ti^cal  >c.ir 
I'.MiuiT  and  t'lu-hing  £i'.s(t(»,(MMi,<MMi  ,,r  many  nuUi'ins  hcynnd 
this  last  ainuunt.  in  the  fiscal  vear  cL-mu^'  March  ;;i.  I'.M  v  The 
total  of  these  votes,  including  the  last  one  of  £,-,:.o.nuo  ooo  .,n 

DecetnlK-r  1:5.  l'.»17.  is  tti.r.'.fJ, ,""<'• 

VOTES  OF  CREDIT.  AUGUST,  K'H,  TO  DKCEMBEK  :!I.  l'>17 

'""•'■'  4;liHlO(lO.(MM> 

;17  (iiMi  mill 


Augllit    '> 

Nincmbrr    '•' 

M.iicb   1 


I'M.i.Ki 

4.  March  I  ' 

5.  June  ''■ 

«.  July  .;••       . 

7.  Si'iitember  1-' 
«.  Ni.vfmhfr  1" 
n     FVhriiary   22 

10.  l-ihruarv  --  ' 

11.  Mav  2.1'. 

12.  lulv  24    .  . 
i:i.  ( )ctnhcr    1 1 
14.  December  I'i 
l.».  Februarv    1^ 
lii.  March   f''' 

1:M:  IS 

IT  Itbruarv   l->  " 

is.  Mav    10' 

l!t,  July  2.-. 

20.  September  2:t 

21.  October   :fl 

22.  December  l:' 


10I4-ir, 
HU.'.lii 
inic-i; 
litlT-lS 


Summary 


■  Available.  April  1,  H»l- 
'Available.  April  l,-101i 
•  Available.  April   1.   1^1' 


t;;iti'j,iMiiMMii> 
;.    2.'>i>,o(xi.ii»io 

J.'ld.lMK*  Ollll 
l.'iO.OIKl  IHIO 
•J."i(|)mIII  IHMt 
4(10,11111)  I  MM) 
I'JOIHMI  illlll 


L  l,4;iO,uoii,iiiio 
i;      100.01  ifl  0(10 

:((»(( (Hio.oi  10 
4."i((.(l00.0("l 
:iil(l.(IO(Hi(IM 
4()()d(»idiiil 
■J(H  1000  (100 
))OJlO(M>00 
£2.010.<MM1,000 

I-    :i.-,(i  OdO  OKO 

.->(  10,001  MM  10 
(1,')0, (100, Illlll 

:i,i(i,(iiiii  (10(1 
4(1(1  (1(111  (100 
."i.">(l  (1(1(1  ( (Oil 

£  J  ^1111  111  III. 11110 

ij  :i(ij, (100,000 
1  4_'oyiO(i  000 
i'dio'ooonoo 
i^-oo, 0(111  noil 

£t5.j'J2, (10(1, 000 


1: 


Till.    l-IXAXCIAT.    HISTORY    OT   GRi;.\  .     l;Kir.\l.V 


This  cn'.riiK.u^^  .-uni  icprociits  practically  the  war  a"i.l  S"vern- 
inciit  C(i>t  -lurin.L;  ihc  iicrixl  since  r.»ll.  The  .>um  In.-,  hecn 
secured  hv  (  1)  taxatidii.  (-)  frtjm  ni.iUaxahle  income  and  {'■'>) 
hv  luans.  The  co^t  nf  j^'overnment  before  the  openinf^  of  tlie 
war  uas  ajiproxunately  fii'to.ooo.OOO  annually,  so  that  there  is 
charj^'ealtle  t^  that  exjien-e  the  -uiii  m  £il>:;,0()(i,(i(ii».  Ifavuij:  the 
(lutlav  tnr  war  £f,,-j  1  s^odo.diiii  up  to  April  1.  I'.'l"-.  The 
revenue  fur  the  >anie  period  was  il.T>'.',0(m,oo(i  of  which. 
£l, .")'.)-', ouu.oixi  wa.>  frnni  taxation  as  shown  by  the  table  below: 


;!:vi-:xuF.  ikom  taxation'  ' 


From  Aii^'Uit  1,  1!'I4,  to  Marcli  :)1,  I'.M.-) 
1-r.mi  A|.nl  1,  I'.'l.'),  f.  March  -M,  l''li. 
I'rom  April   I.   r-"lil,  i,,  Marcli  -^l  1'-'I7 
1  rom  April   I,   I'MT,  to  April   1.  H'l- 


£  l7i,i:>'.t.M0i) 
■_".iii'^s7:(  (111(1 
.■.l(i,':)i:i.(M'0 


£  1  rv.tj  .')4."i  CHO 


'i'lie  process  of  subtractinjj  the  tax  income  and  the  additional 
nontax  revenue  from  tlie  total  of  war  cxjien^e  ami  government 
e  .peniiiture  leaves  £.".,1  Tl',(K)(!,(MH)  to  be  raised  by  l.ian^.  It  ha> 
been  cu-^touiary  to  dt-duct  the  ad\ance-  to  the  Allies  and  the 
Dominion-  from  tiie  a^,L;resate  of  the  war  debt.  If  ihi-  is  d<.ine 
the  total  left  i>  ajiproxnuately  £:i,ti2:)JH)u,oiii(. 


Avi;k.\(;e  Daily  Costs  of  thk  Wau 

Each  vote  of  credit  has  been  a  disappointment,  for  the  esti- 
mates of  the  e'h;incellors  have  been  exceeded  b_\-  the  risinq;  cost 
of  war.  Wdien  I'renner  Asquith  presented  his  estimate  on 
X'oveniber  IT.  I'.Ml,  he  st.ated  the  cost  was  then  estunated  at 
t'.H)n,(H)(i  to  tl.noo.oiio  per  da\  ;  --peakini,'  less  than  four  months 
later  he  said.  "  the  war  co'^t  for  the  l'  b»  days  then  endinp  had  been 
at  the  r.ate  of  £l,.-,(>o.ti(i(»  per  day."'  On  June  1"',  I'll.'..  the 
''rcuuer  m  a-kinir  f'T  the  fifth  voite  oi  credit  found  it  nece--ary 
to  r.oi'-e  the  e-timated  cost  to  £:;,(i(M).ooi)  per  da>.      So  rapid  were 

K(.vt.iuK-   and    i:xpuulituri'.    H.    C,    Wlute    Taper?.    No     134    tl'.!!."!!.    ll'J 
(  l:ino,   ;:ii   ,  I'.ilT). 

■  / Vi.-   Tiiiu-s.   March  ■-!.   l'.''l''. 


VOTES    (IF    CKI-.DIT    AND    THi:    COST    OF    THE    WAR 


4;i 


the.e  increases  that  the  Prime  Minister  .uR-e^tea  £.-.,niiO,()00  as 
the  i)rol)able  cn-t  and  one  that  ini^'ht  be  rei;ai\leil  as  a  safe 
estimate.'  The  future  reciue^ts  were  ha^ed  ui)on  tliis  a->umpti(in, 
f,,r  It  was  expected  that  the  v.ite  (.t  £:;iH).on(i  ooo  on  February 
■2-2.  I'.iK'',  would  la-t  ti"  days.  At  that  time  the  Chancellor  >taied 
that  the  debt  service  al  .ne  was  requiring  taoo.ooO  a  day.  By 
tJct'tbtT  :J7,  I'.'lt;,  the  uld  vote  nf  credit  wa>  e.xhausted,  indicatin;; 
the  passing  of  the  £.".,< kio.uoo  per  day  cost  and  the  last  of  the 
vear  the  daily  cost  was  Mi,>,duly  ('ver  £:.,Too  ooo. 

When  the  v  ite  .ii  credit  was  asked  Julv  I'a,  HUT.  the  Chan- 
cellor was  faced  by  a  pe,s>inii,stic  Hou^e  due  to  the  excess  of  war 
costs  over  the  bud.get  otimate--.  The  dailv  expenditures  at  that 
time  were  stated  to  he  £<'.,T'.i:.,uoo  f,  ,r  the  previous  112  days. 
The  bu(l.;,'et  estimate  was  £:.,ni.'Hio,  uhich  left  an  excess  over 
the  bucb^et  of  £l,:!>4,'>iin  per  day  <.r  £  i:..-.,«>o0.ono  for  the  period. 
The  exi)lanati-n  ntYered  by  the  Chancellor  c-alled  attention  to  the 
heavy  advances  tn  .\llies  and  Do.mini.ns  now  am..untin<;  to 
£l.ir,l.n(i(),0(iO.  In  the  11-  days  under  discu-sii>n,  the  Allies 
and    Dominion^   had   received   £l'.>7.(m(),n<aO.     The   expenses   at 

home  had   increased   nearly   £100,00(1. >.      In   tlie    debate   that 

followed,  Mr.  McKenna  said,  "that  in  b.is  opinion  the  country 
must  lo(,k  forward  to  an  expenditure  of  £->,ono.oo()  per  da>."' 
The  Chancellor.  Honar  Law.  was  so  impressed  with  the  situa- 
tion that  he  made  an  admission  that  was  recei\ed  wi'li  surprise. 
His  statement  was  as  follows: 

That  actin^  on  the  basis  of  a  joint  campaii^n,  the  Cnited 
Kinj^dom  had  borne  the  whole  expense  of  the  Allies  for 
purchases  in  Creat  P.ritain.  It  is  an  open  secret  that  the 
res.nirces  available  f'^r  pavments  in  .\merica  were  about  ex- 
hausted when  America  entered  the  war.  .\Ithou,i;h  thev 
could  not  continue  tr.  expend  at  the  present  rate  they  could 
do  so  loni,'er  than  their  enemies. " 

The  vote  on  this  dav  was  the  largest  in  the  histr>r\-  of  the  war. 
The  vote  ju^t  prio.r  to  this  one  was  for  £:.O0, 000,000,  but  the 

'  The  Tiitu-s.  Sem-nbcr  l".  l'.'i.'>. 
'y/.uf,  July  ■^•\  If"". 


44 


IHl     KIN  Wei  \I.    HISTdRV    (iT   CKKAT    BRITAIN 


(  li.iiK-cllMr  ,-i~kc>l  i'T  £i::,(),niib,cn(».  -tatiii.L;  iiat  the  anK.init 
wduld  irrv  tlie  war  t'l  the  la~t  nf  (Jctn'icr.  The  rL-(|uest  fur  ^n 
!arL;i-  .iii  atiininit  hr^  lu^lit  criticisms  and  ^li^^estiniis  fur  --mailer 
Vdtes.  'i'lie  pre---nre  "f  tmu-  -tnoii  in  the  way  of  this  request. 
^ince  the  preijaratinn  ^f  the  material  and  pas-aj^e  ni  tiie  vnte  re- 
([uired  fifteen  dav^.  .\everthele>>  the  next  vnte,  ()ctiilier  :11,  was 
fur  the  amiiunt  nf  £-}iMl,iMiii,(iO(J  and  the  <ine  uu  Decemher  i:!,  for 
the  ]>erin,l  td  March  ;il,  i;'l>,  was  fur  t.VM) ,(1(hi.(m)ii.  makinj,'  the 
lutal  vute  >'i  credit  f'T  this  ti-cal  year,  £i',^(|(i,()(M).(IO(».  The 
ex]ieiiditures  uf  the  tirst  -ix  niu-nhs  <n  the  year  were  £l,:-':'.7,tit'" 
.1  ilay  more  than  the  Lhancellur  had  e-timated.  In  his  explana- 
tiuii  I'i  the  dilYereiice  li\  the  n.-e  uf  ainuunt-  paid  tu  the  Allies, 
the  purchase  muney  ii.~eil  tu  Imy  -uiiplies  ^hip-  and  materials, 
he  ua-  able  tu  reduce  the  aniuuut  t"  a  deficit  "f  £L':l'.'.nii(i 
jier  day.'  The  ( /hancellur  made  no  jiropusal  tu  introduce  an 
interim  hud.uet  and  upheld  hi^  ]>u-itii>n  and  that  uf  tlie  na- 
tiuu  1)\  C()mpari>un^  with  the  deplurable  cniKlitiun  of  derman 
tinances. 

Jn  moviii;,'  the  new  vote  of  credit  December  i:!,  H'lT,  the 
C'iiancellor  ~hu\\v-d  that  the  previuus  vute  would  last  as  loni;  as 
calculated,  to  January  '.',  \''\^.  The  rate  of  deficit  i;ro\\th  up  to 
heceniLer  1  is  -uUKwhat  larger  than  the  previous  perioil.  l)n 
the  ilate  i^iven  al>o\e.  the  co-t  per  day  will  amount  to  £i;.7'.' l,t">'> 
or  tl.-';*^:;.*'!'!!  per  day  Ui  c.xce-s  of  the  hudi^et.  This  shuwiuL; 
appe.ir^  tu  ^'ive  a  u  ruii^  impres>ion  uf  the  financial  >tren,uth  of 
the  Country  if  no  account  i~  taken  of  the  ..ff.-et-  atjaiu'-t  the 
deficit,  l'])  to  Decemher  1.  I'.'IT,  tlie  budget  deticit  for  the  \ear 
amounts  to  £;)(i',',(H)o,onii.  rhcre  were  £7'.'.>'(M).()(i()  in  adv;uices 
tu  the  Allie-  uver  the  bu(l,L;et  estimate,  paxnieiits  to  Dominions, 
£j7,iin(i,(iiHi,  piirc:i;i,-e^  ^'i  -upjilie^  and  f<  od  amount  to  £>'.', T.'.ii,- 
inid,  and  b.alance-  in  the  liand~  "f  aj;ent.^  briny  these  credits  to 
£ji':.,ii(i(i,(i(io.  thus  reduciuL:  the  budget  deticit  t(.i  £:;.'0,n(ii»  per 
dav  instead  of  £  1  ,l'7">,"ii"."  I  he  Chancellur  then  went  on  to 
explain    t!ie    dead    \\eis.iht    charge-    amounting    to    £^4,U(Mi,Ut»0. 


riu-  Tiin.-s.  I  III.  '■.  r  :'!,   In  IT. 
ro'liiuiiriitarx   l'ii;!tiS.   W    C,   1  lie  fin  be  r 


ilUT. 


V()Ti:S    OK    CKHItir     A.VI>    TIIK    COST    OF     T 1 1 K    WAU 


4:. 


Tliis  sum  was  spent  fur  ir.crea-e  in  tlie  aviati^'n  pr^i^ran!.  f'T 
Jniiian  troops  in  Mf^npittanua  and  for  ini-Cfllaiienu-  .--er\ices. 
and  tlic  results  ohtained  liy  the  expedition  in  I'rance  and  I'ales- 
tine  were  such  as  U>  cause  tax  payers  to  face  increased  expendi- 
tures with  equanimity. 

The  hist  speech  nf  Mr,  I'xmar  Law,  Marcli  7.  I'.'l^.  jiresented 
the  facts  of  expenditure  upon  his  recpiest  for  a  vote  of  credit 
to  hep;in  the  new  fiscal  year.  From  his  analysis  the  daily  costs 
show  some  decline,  but  not  a  material  one.  lie  placed  the  daily 
cost  at  ttl,7."i'i, •'(!(),  and  in  consecpience  stated  conlidently  that  he 
expected  the  vote  of  ff.oo.Odd.odO  which  lie  nas  askinj;  to  hcj^iu 
the  \ear  to  last  until  June.  From  December  1.  to  February  '.", 
r.U^,  the  tlaily  cost  averaged  £tl,lnT,dn(i.  TIh-  expenditures  for 
the  vear  up  to  February  exceeded  the  bmU'  '  allowance  by  the 
sum  £t>f,4.n()(i  daily.  The  excess  for  the  [.eriod  wa--  £-\*'A.- 
ood.noo.  The  Chancellor  reduced  this  sum  by  recoverable 
amounts  of  £L'nt;.7.",(),ooii,  leaving  a  dead  overcharge  of  £FM,- 
:.'.")<», (Mid.  Me  explained  this  excess  as  due  to  the  increased 
activities  of  the  army  in  Mesopotamia  and  I'alestine.'  The  out- 
look for  the  coming  year  is  not  any  more  favorable  in  view  of 
the  call  for  more  troops,  the  extension  of  the  conscription  age, 
the  increased  activity  of  the  enemy  on  the  western  front,  and  the 
heavier  claims  of  the  .Allies  for  more  financial  support. 

The  Progress  of  Expenditire 


The  progress  of  ex])enditure  has  already  been  shown  by  the 
stead V  growth  in  the  total  of  votes  of  credit.  This  had  reached 
for  the  tiscal  year  ending  March  :il.  I'.tl^.  ])ractically  £L',^dd,- 
(Hid,Odd^  and  for  the  war  up  to  .\pril  1.  I'.'l^.  £t;,.-,<,tj,dOd,ddO. 
leaving  the  national  del)t  about,  inchuling  the  prewar  debt  of 
£t;."id,dOO,ddd,  £.'i,^dd,ddd,dd(),  March  Ml,  r.tl>^,  or  £.■),l."ld.Od()- 
ddll.  It  has  been  the  purpose  of  every  chancellor  to  meet  the 
interest  charges  from  taxati(  w  and  this  has  Ux-n  done  in  every 
instance.     The  criticism  of  Mr.  McKenna  that  such  was  not  the 

'  l'a>lidw,>ttary  l)cl\itcs,  H.  C.  vol.  lli:i,  X..    I'>.  p.  ^l^iT 


40  llil.    FINANCIAL    llI.-iTOKY    Ul-    GK1:AT    UKITAIN 

casL'  111  tlll^  \car  ?  iinanccs  was  answered  by  Boiiar  Law  in  thc-^e 
wiiril-, 

tliat  already  in  thirty-fivc  ueek>  we  knuw  that  the  e\ce-s  i-i 
revenue  0111111,14  in  nver  the  hud^^et  e-tiniate  will  ni'jre  than 
en'.  L-r  nitere.-t  and  ^inkin^^  fund  nn  the  inerea^e  ui  expendi- 
ture.' 

The  iiUere^t  char<;e  for  this  fiscal  year  will  amount  tu  at  lea<t 
£:js,-,.ii(ti».(iu(i.  do  this  nui-t  he  added  a  sinkinjj  fund  charge 
and  the  nrdinary  ci-t  .if  s,nivcrnment  in  time  uf  peace. 

On  .Ma'.  ■-.  r-»17,  The  Tmus  puhlidied  a  table  shuwiiiL;  the 
jirop. -rti'in  of  war  revenue  Xo  e.xiJenses.  Idiis  table  covered  the 
]irevi-u-  \ear>  of  the  war  and  i;:a\c  the  estimate  for  the  present 
tlscal  \e:ir.     dlie  table  i:-  reijruducetl  below. 


THF. 

PKoroRTiox 

Oi"  W.\R   RK\'I-:XUE 

TO   EXPEX 

•^I 

"S 

I 

\'rcfnta^;i:                         i 

crcciuak; 

T..tal 

of 

1  uta! 

lit 

Kxpcll-^c* 

Rt  \cnuc 

Expense- 

Tax 

E 

xptnsc 

liH:i.i  \ 

V       1H7(MMHII1(( 

£  I'.KIIIM). 11(1(1 

£  1  (!:{ iiiiiiiKiii 

r.M  1-1.'. 

.■)ii:iHnii  iMHi 

•J-i(Wlll(I.IHIil 

4(1.1 

1  s'.i  mill  1)1111 

:i:i  <i 

l:il.'i-lt^  . 

1  ."i,")'!  niiii  (Hill 

:i;!il,ii(i(oimt 

■-!1.'' 

■j;i|l  IIIMMKIII 

IS.'. 

I'.Mi;  IT 

■_>|  IK  111 II 11  Kill 

ri7;i_nii(i,iiiiii 

■Jti  117 

T)!  t'iKKHHKl 

ii-t,4 

i;M7-1s 

■2  li'.MMIIIIMIlKI 

(;:iN'(MiiMiiiii 

27  OS 

.")li',l, (1(1(1,1100 

J»  s 

The  estimate  for  l'.M7-l^  is  not  los  than  £,-.iin.(i()0,(i(>0  too 
small,  d'wo  remarkable  facts  ajipear  in  this  statistical  ])resenta- 
tioii:  one,  tlie  i^rowth  of  war  expenses  fr.)m  £.M'i:1,0(HI.ihi(i  ,,f  the 
tirst  vear  of  tlie  war  to  nearly  £:;,(in(t,(i(M),(t(io  in  I'.HT-l^-;  the 
sL'coiid.  the  amonnt  .if  revenue  fr.mi  taxation.  .\t  the  time  .'f 
th.e  (  rime.in  W  ;tr  the  expeiisL-  reached  £>>'■>. -~ ~ .*'<■' ^  of  which 
XL".'. •".'■>-.  1^''>  was  paid  from  revenue.  .\  more  recent  example  is 
tlu-  S'  mh  African  War,  which  co<t  £LM7,:'li;,ntin.  and  £.")'-.4:.'l,- 
11(111  ,  i  that  was  paid  .  ait  of  revenue.  (.  ousiderinj,'  the  enormous 
slim  im-lvfd  the  show  in-  o.'  J7.<'">  per  cent  for  reveu'iie  pay- 
ments ill  this  war  i.  a  notabl.'  accomplishment.  Dn  the  otluT 
hand  !iie  eiiormit}   of  the  undertakin,^:  and  the  impending  iman- 

'  Parliamentarx  Dcbdlfs.  H    C,  H.  (-imlicr  2.   i:M7. 


\iiri:s  di"  cRi.n 


IT    AM)    THE    CiiST    Ol"    TllK    WAR 


cial  result-  place  a  t^^rcater  rt-pcn-iliilitv  upon  the  tax  [Kiser  tl-at 


as  ii'-t  lir< 
>h 


■ht  all  the  re-iilt>  the  advocate-  l..r  ni(»re  laxaliini 


link  -huuld  have  cuine  {"  ]ia-s. 


Tin:  Xatidxal  Dkut 

If  Mr.  McKeniia"s  prophecy  is  true  that  Marcli  :il,  I'.U^.  will 
1  (Icht  at  £(i,ui)(\0(>o,(>n()  Jt  hecnme-  highly  inipur- 


,\ 


uani-t 


see  the  natintia 

taut  tn  kn- i\v  what  the  nation  ha-  to  meet  the  situation 
thi-  (lelit  there  will  he  by  that  date  more  or  ie-s  recoverable 
amounts  of  tl.T.Mi.tHid.odo  payable  as  advances  and  loan-  from 
the  Allies  and  Dominions,  in  his  -peed'  of  DecemlKT  li',  r-»17. 
Bonar  i,aw  called  attention  to  lUe  nationa.  balance  -heet  which 
showed  assets  of  nearly  a  alliou  pound.-.'  There  were  balances 
in  the  form  of  ships  ^-^.d  stocks  amounting  to  £ii:>n,t)nii,(i(iM.  ex- 
cess protils  on  products  that  would  amount  to  f^'no, nou.oiiii  and 
equipment  in  the  fdrm  of  building-,  machinery,  etc..  valued  at 
a  verv  larf^e  -um.  These  sums  amount  ])o,-sibly  to  £7"iU,(hi(i.(i(I(i, 
which,  added  to  the  possibly  recoverable  amount^  due  from  .Allies 
and  Dominions,  make  the  assets  £l\.-.(I(i,0(Hi.()()(I  to  (jff-et  the 
national  debt  of  f."i,MiO,(inii,(M)(».  The  situation  at  the  close  of 
the  present  fiscal  year  would,  therefore,  appear  to  be  somelhiiiR 
like  this: 


Total  of  ii.itiona!  debt,  March  31.  1018 
Advances  ht  .Allies  and  Duininioiis- •  .  • 
Part  ot  gift  of   Indian  Government    • 

Utbt   at  beginning   of   war 

Increase  of  debt  due  to  war 


£,")V(iii  11(11)  niMi 

l'."){iii'onii'oiiO 

in;  0011. (Kill 

ti4.')jilMMMI0 
:i  IKIO  MOlt  OOH 


The  detailed  statement  of  debt  of  the  United  Kin;,'doni  thus 
stood  in  February,  T.H^,  at  £.'>,i;7>,>^0i),oiKl,  distributed  a>  -hown 
in  the  followinfr  table  :  "' 


f'ai'.uim.-ntiiry  l>ebat,-s.H    C.   Pecemher   1-,   I'-H 
London  tconomut,  February  .:),  li*18. 


4S 


Tin:    ITNANX  lAl.    IllSTDKV 


I-'uiuKd  ■Kill 

I  iTniinalili-    aiuuntits 

UiiluiuK'd  (Irbt 

.'('  i  i)cr  CL-ut  war  st"ck 

41 J  per  cint  war  >tuck 

4  anil  ■'>  per  cent  war  ^tock 

NatiiMial   war  l)nn(l> 

TrcaMiry    bills 

KxclHi|urr  txiiuli 

War   -avinn-'   ccrtilicati^ 

War  (  xpiiidituri-   ctrtiticati.  > 

OtlK-r    debt 

AiiRTicaii    I'laiis 

Tfrnpurary    advaiici  > 

OtliiT  cai)ital   liabilities 


OK 

<_iKKAT 

DRITAIN 

£      :U7,S(MI  IMM) 

HJ.T(M(,(MI(I 

liO  IIKIHMMj 

■J  ((St;  111)11  (IIH) 

':tii:i;MMi  11(11) 

l,ii;>4^MiiMii)ii 

4ii_\riiMi.iiiiii 

liO^milMllMl 

•j:i  ."iiiii.iiiiii 

Slil.'.MIO.IlllO 

.'.  1  tnii.iiDi) 
.')! '2(1(0)111) 

£."i  ilTs;  SOD  11(11) 

Tlic  ditt'ert'iict.'  Ix-twccn  the  amnunt  -tatcil  alMVc  and  in  this  tabic 
is  acci Hinted  fur  l)y  tlu'  ditlcrcnce  ni  about  tivc  weeks  in  the  t\s(> 
statements. 


CHAPTER  V 

War  Loans  and  Financial  Devices 

In  Auj^ust,   r.'H.  the  Chancellor  asked  that  the  Treasury  he 
})crniitteil  tu  ixirnnv  in  such  manner  as  it  sec>  tit  on  the  security 
(it  the  Cimsiilidated  I'und.      This  proposal  (littered  fnmi  all  nther 
war  1<  an  hill--  in  that  it  did  not  >tate  the  actual  aninunt  iMr  the 
method  by  which  the  ni^ney  was  to  he  raided.'    Durinj;  the  nearly 
four  vears  of  the  war.  the  Treasury  has  taken  advantage  of  this 
provision  and  tried  many  plan-^  for  securing;  fund-.      15eL;inninK 
with  a  fairly  well  marked  i)olicy  -f   furmal  loan-,  -upi)lemented 
hv  short  time  borrow  iuL;,  the  Treasury  has  reached  a  policy  of 
continuous  borrowinj,'  without  tixed  subscription  periods  or  esjie- 
cial  emphasis  upon  any  one  type  of  security.      Tlie  policy  at  the 
openin^^  of  the  war  may  be  epitomized  as  one  which  provideil  t'lr 
the  issue  (jf  a  j;ood  sized  loan,  payable  in  two  or  three  decade.-, 
at  a  j^ood   rate  of   interest,    followed   by  smaller   leans  mu   Iohl; 
dated  K.xchetiuer  bonds  u-ed  to  redeem  Trea-ury  liill-  when  the 
amounts  became  ti'o  lar,i,'e.      C'onpled   with  tliese  jirovi-i'm-  w;i- 
the  sound  purpose  to  hnld  in  check  tlie  i-suc  o,f  pajicr  currency. - 
The  e.xigencv  of  war  ha-  never  been  ku'iwn  t^  leave  any  plan 
intact,  ;iiui  the  United  Kingdom  with  all  its  exjierieiice  in  tman- 
cial  atfairs  finds  it-elf  a  lonj,^  way   from  the  startin,!,'  p(.)int  of 

r.ti  b 


TlIK   CiRE.XT  \V.\R   Lo.VX.-^ 

All  tiild  there  have  been  four  .i,-reat  I'lan-  -ince  the  war  -t.arted, 
tliou-h  the  la.-t  ''tie  did  not  have  a  lixed  sub-cnption  period  f ■  t 
the  s.de  <.f  b. nid.-,  a-  did  the  first  three.  Tli.  tirst  loan,  ua- 
offered   tM   the   public   in    Xovember,    I'.'U,    when    £;;.-,(i.n(in  oon 


."Statement  of  ("har.ccll.T.  Pdrliiiifriit.irx  /'.'', if. •.>■ 
London   lic."\'nmst .   XuMiulHi    H.    fit''.  [..  siji!. 


[1.  C,  August  2'-,  I'.'ll. 


■,() 


llll,    :  INANi  lAl.    l!!>T<iKY    OK    GRKAT    I'.KIIMN; 


wiTf  ^uli-LTihcd,  the  -ci-uii.l  rai-^tnl  £>'\>'. '."n"  in  June,   r.U:.. 

tlic  llunl,  i^iKi.iKni.diin  in  Jamiar_\,  I'.MT,  ai'.'l  the  la-t  "Uu  ua-; 
mIYltciI  in  (.U'tiJier  ami  X' .\ enihcr.  I'.'IT.  The  lir-i  three  Inans 
jiri'iliieed  £  1  .^nit.diin.iHid,  tl-.c  ti-^'ure^  I'^r  the  la-t  I  lan  -h  i\v 
\\eekl\  -a!e>  varvii.^  I'r.  in  i'.t.oiMinno  to  £  (ti  nooniMi,  tli<.ui;li  tlie 
avera},'e  i^  in  tlie  nei<;lil)Mrlin<Kl  ,if  £1^,ih)ii,ii(mi,  The-e  MriVrin.i;s 
were  nut  the  "iily  inrni^  "i  licrr'iwini,'-  nndertaken;  -inee  the 
'rrea,->urv  ^tiered  at  the  --anie  time  l'.\ehe(|uer  ljMnd>,  'I  rea-ury 
Itill-.  war  fxpcii-e  certilicate-  ami  >a\  in,;,'^  ^tani])  certil)L'ate>. 
The  reMilt-  "i  the>e  h'Tr'Avin^'  ■.•nteriiri^e-  i"r  the  |)..iiKl  Auj,'ust 
1.  I'.M  1,  to  January,  I'.UT,  is  well  suiiinianzed  m  the  appended 
tahle- 

.n1-.I    war    ll.Mi:   I'.OI^KOWINGS  AUGL'ST   1.   H'l-t.    lU 
JANfAin'    i^ii,    1''17 


•i     .      |HT     ClPlt     luilll 

4'  .    per  cent   luaii    

•'t  per  cent   l-"\clui|iiiT  Imiuls    (net) 
•")  per  Cent  l'.\clKi|uer  ln.nil.^ 
t>  per  cent  l{\clie(iuer  l)MniU 
War   expeiuliture   certificates 
War   .-avinus   certilicates 
l-"ir>t    Aiiiericaii    U'an 
Net   i-Mies  (if  Trea'-nry   l)ilU 
W  ajs  and  means  aihances.  net 
Net  '•  utller  debt  " 


Jlednet    'J  ltii',-l-7,iij:l  np.iiil  tn  I'.ank  ni  I'.ngland  nut  nt  pr- 
ceeds  (if  4   .•  per  Cent   l"an      


V     :i:(1.7;i'',oiMi 

."i'i2,:)4ii.HiM) 

.in  .",71  iiiio 

;>.i4,:)l:Mi(i(i 

li;ii,s:ii  (MM) 

li'.l]s7>,  (KID 

44.MllMJI>il 

:.(!  sjii  iiiiii 

1  (iiij  .1 1^,(1(111 

J>4,277,iiui) 

1SS_!IJ4,I)(II» 

t:i.(i:il.J-iJ,iilMi 

ii;ii,4:is.uoo 

£L',s'.iO,Sr)4,uni» 


P.esides  the  iteIn^  specified  above  we  know  that  three  loans 
were  raided  in  America,  anu)untinj;  to  £l<;d.(i(M).(in(),  duriuL; 
the  period  covered,  of  which  only  one,  for  tuii.uoo.ooo,  is 
known  to  have  been  Itrouj^dit  into  the  I-"..\chefiuer.  There 
w;is  ,aNo  a  loan  of  lon.oiio.ooo  veil  from  Japan,  and  another 
helie\ed  to  li;i\  e  lieen  f-  r  S.">ii,(too  uiio  ir,,m  Canada,  hut 
whether  the-e  advances  ;ire  included  in  the  item  of  "other 
deht  '■  is  kn.own  onl\  to  the  initiated.' 

Since  this  t.aMe  was  tirst  printed  the  deht  has  ])cen  increa.-ed 
li\  tile  sale  I'i  1m  nd.<  and  certit'sc.ates  .miountinL:  to  £j,77^,OUO,UeO. 


'  Liiiidou  tu'i'iioiiust,  March  ■',   1''17,  p.  i2i. 


\S   \K    LOWS    A.\;>    FIX  \\(,[  \1.    lilAICES 


r>i 


The  liMTf'  uiiii,'  traii-;;ictiM!i~  cf  the  luiijli-h  ( ii^MTiniicnt  inav  iic 
,urMii]H-<l:  (  1  )  suh-crilicd  !<i;in-;  (  i' i  idr^i-il  l.'.iii-;  ami  i  •'.  )  uo^m- 
tialiii-  l'iaii<.  Tlic  tir-'t  ci.ii-i-t-  >•{  the  varii.ti>  iitt\TiiiL;>  i'mt  --uh- 
scrij)tiiiii^  made  tn  the  ])uhlic  in  tlie  fnriii  <•{  Im^kI^,  -~taiii]i>.  cer- 
titieate>  and  'I'reasiiry  liills;  tlie  ^eC(ln(l  i>\  currencv  ii..te  i.^-ues 
and  the  American  d<illar  -ecnrity  >clienie  hr  whicli  i'i>rei,L;n  h'.nd- 
were  lirnii^ht  intn  tlie  |)lls^e->i"'n  d  tlie  I'rea-urv  U.r  C'llla'.eral 
n~e-..  1 1'  tlie  war  ciiitinne-,  the  latter  ^'r.ni)  inav  eiintam  a 
larj^'er  share  nf  t'lnancial  ]>rn]). i^al^  than  it  d(ie-  imw ,  sinrr  \a- 
riiai--  sUf^i^esti' ii>  are  heini;  made  in  the  j)re>^.  an..l  even  tiireat- 
ened  1)\"  meml)er>  nt  Parliament  in  their  >]ieei-he>  mi  the  ]ire  eiit 
{lolicy  111'  ilie  j,'Mveriinient,  to  estal.)li>h  a  ^y-tein  nf  prescribed 
loans.      The  third  cla>s  cunsi^t-  of  the  loaii>  negotiated  abroad. 


Tut-;  I'"ik<r  W  ak  I.oa.n 

The   first  Inan  \\a>  altered   in   .\'m\  ember.   r.»14.  on  a  -l'.'  per 

cent  ba^is  at   £'■'•">  per  hundred   with  acciniulated   inlere-t   alter 

December  7.  I'.U  I.      'J  he  -ub^criber-  were  re(|uired  tu  deii'isit  £_' 

(11   each   ilio    of   their   takings   and    t"    make    pavmenl^   of    L^ 

December  7,  £l<'  December  _' 1 ,  and  a  similar  annuiiit  each  two 

\veek>  until  the  payments  were  ci-ncluded  .\pril  _''■.,  r.tl.'i.      Tlie-e 

I>ond>  :ire  repaxable  in    r.'i'>  and  m.av  b.e  paid  at  the  nption  <>i 

the   government.    March    1.    I'.'-."'.       The\'   are    convertible    IiiIm 

other  blinds  by  the  bearer  and  were  i->ueil  in  tlixi,  tjon,  t."'.>o, 

and  tl.ood  dennmiiiatiMns.'     While  Treasury  bills  were  used  to 

fill  the  ,L,'aps  in  the  bmid  program  at  the  time  nf  the  next  loan. 

Tune,    T.M.">.   Ciiance'lnr   McKenna.    in    explainiii!,'   th''    situation. 

ijave  three  rea^on^  fur  the  ban.     Hue  was,  that  the  Iimii  doe-  not 

fall   due  at  an   early   date,   another   was  that    it-   issue   tends  to 

assist  the  foreign  cxcliaiiije  situatii'n.  and  fina'ly  the  loan  p'dicv 

reihices  the  expen-e-  buth  in  rate  nf  interest  and  administration.' 

.At    the   time   the   ,-econd    loan    was   proposed    £i!.'5r>,00n,(i(iii    nf 

Treasury  liills  had  been  sold,  uf  wliich  £l<'i,.".(Hi.n(i(i  had  been  ti-ed 

to  pay  ott  -ome  of  the  P.oer  War  debt. 

'  /  -iii/.iii  (njrrtt,-.  Xovembcr  17,  1914. 
'  riu-  Times.  Junt  -'::,  VJ\J. 


:,-2 


Tin;    FIN\N(  lAl.    lllSiuKY    nl-    ORKAi     IIUIIAIN 


Tin:  Sr.KiNii  W.^  I  "\n' 

The  iR-A-  loan  \va-  in..r<-  rlalviratc-  in  its  pr.ivi-.intis  than  the 
prcvi.  n.  Mile.      It   carried   with  it  cxtensiAe  re;;nlatiun>   i-r  the 
ciuerM-n  ni  (,Mer  -Mvernment  >ecuritie>  and  the  -ale  nf  Mnall 
,lenM,i,niati..n    thnn.^h  the  p<.>t  (>ttke.      Nu  specific  amount  uas 
set  up  as  t.,  the  Hinn  -i  the  h.an,  and  the  rea>n,i   mr  ihi.  \va> 
the   i.nriiMsc   to  cniivert   the   nlder   -Mvernnient   -ecuntie-.      I  he 
l,,an  i-ued  at  par  and  carried  an  interest  -I    i'-   per  cent.      It 
\sa>  pavalile  m   I'.U:.  witli  an  ..plii.n  ^f  pavnieiil  ni   l'-'-'"'.  and  the 
cnnverMnn   nf   cm-.l-,   ua-   lived  at  £T:.   m1   c.um.K  ennvertihlc 
inlM  t.-.M  nt  lieu-  '    ni  with  the  under-tandiii^  that  the  holder.-  were 
t  .  aiii)l>    t..r  £1<'     'it  tile  new  ban.      This  nuule  the  exchange  rate 
cr,-;,  per  cent.       i"he  annuities  were  exchan-eahle  at   tT">  ni  -''j 
pvr  cent  and  £»;T  in  i'-'»  per  cent  v  £-n  -i  the  new  Inaii.     L-n- 
verM.ui  -i'  the   fir>t   intn  the   secnd  loan   wa-  arran.ued  on  tlic 
basis  ,.t    t'.'.">  (It  tir>t  loan  and  a  ca-h  ])a\nient  .f  £•"-.       1  he  I'.aiik 
,,i    iMi-lan.l    was    the    ti-cal   a-^ent,   l.n.    the   den.  niinati-tis    s,,l,l 
ihrou.^h   It-  a,i;enc>    were  liniite.l  to   £lnn,      ';,,  meet   the  wi-hes 
,,t    small  inve-tors.  the  post  ottice  wa-  authorized   to  sdl  small 
denomination  bonds  ,,f  £:.  and  £-'.V      -i'hrou-h  the  siine  a.^eiicy 
.sen),  \ouchers  could  he  hou.^ht  of  £l.  in-,  and  :-.  until  1  )eceinher 
1   and  Used  oii  the  pnrcha-e  of  the   £:.  and  £->:>  denominations 
which  Lore  •'.  per  cent  interest  on  caleii.lar  months  or  an  intere>t 
(.1    I'j  per  cent  lor  the  actual  time.' 

\  lewed  from  everv  point  •  i  linancial  test  this  loan  wa-  a  xast 
succe-s.  The  actual  lunnher  of  suhscrihers  ihrou.^h  the  Hank  ot 
l-.n.dand  wa-  .".."in  nun  and  the  amount  suliscrihed  hy  theni  reached 

£.-,7((,niio, Xor  doe-  this  -urn  include  the  conversions  of  old 

.-t.'ck  liut  reiiresents  new  money.  I'p  to  jnly  in,  I'.M.-..  the  post 
,4iice  suh-crii)tioiis  uere  £l.-..niM),()()u  hy  -!7,(hmi  person-.  The 
I,  tal  reached,  durin-  the  -uh-criptiou  period,  £i;o,,.i)nn.()n(.,  the 
lar-e-t  loan  up  to  that  time  made  hy  any  people.  It  diould  also 
he "stated  fat   the    joint  stock  hanks  look   £-oi.,niiu.u(M.  of   the 


'    //!.-      I  IIIU-S.    JUIR-     -- 


I'll 


luaii.     Tlu'  cxcliaiif^e  transactions  referred  U>  alM.vc  art-  -et  inrtli 
in  the  ta!)k'  lichjw  :  ' 


Sti>ck 

Con'-ol- 

'-l<.  |icr  criil  Aniuutio 

-'U  pir  iiiit  Amuiitii'- 

•i'/i  per  cnit  War  U>aii 


AlIlllllTlt 

l'rt\  iciii-ly 
(  )utstaTuliiiK 
i;."i,li;.lii|.i"Hi 

J'l  SlJ  IMMI 

:i]mi:i  iiuci 

:l."i()  OOll.lMMt 
.ilH'.t.TJii.lMKI 


Amniint 

(  niiwrtcd 

t;j(ll  IIIHIIMMI 

;,.'i(Mi  (iipii 

I  IHIII  IMIII 


£:t47,.'>ll(MMH) 


Ralaiire 
l'iKo\intiMl 

j_',:UJ,MiHi 
js  1.1  III  III 

_'l,'i  IIIMI  (Kill 

t57.i,J2tlOOO 


All  animnncinicnt  ua'^  i^^iu-il  in  I  )ecfniliiT  \'K  I'.M'l.  that  a 
war  li'an  liill  wnnM  In-  ])a--i'.l  lici'iri'  thf  prur. i^atinu  <'i  I'arlia- 
iniiit.  Ilk'  -tatctncnl  ua>.  !ikf\vi-c  niailo  two  ucek^  later,  that 
tr.'thiT  -ale  nf  l".\rhei|ner  ImukI-  wa--  to  -.f  p.  In  thi-  prMvi-Mii 
the  war  -.avin^'>  certificates  were  nicludeil  ami  all  the  -i^n- 
[I'Mnteil  t"  a  tein|)orar\'  sii.,|n'n-i' m  i.f  the  i>-ue  i>\  Trea'-ury  hills 
a>  well.  Tile  ciinntry  \\a-  "  I'ed  up"'  >  n  -h' irt  ilatid  -ecuritie- 
and  the  re(|uiretnent>  nt  inve-tiTS  Idnked  t"  a  dittereiit  I'crni  of 
>ecuritv  and  relief  from  the  -Imrt  dated  paper  which  in  the 
case  of  the  I'rea-ury  hills  ha<l  reached  il.ll."i,''i:.,n(i(i  ,,n 
Decenil'cr  •'!!." 


Til!'.   TkRMS  of   TIIF.   TllIKli    l.OAX 

Tile  teriiH  of  tiie  new  loan  were  stated  h\  Mr.  Ronar  Law  in 
the  IhiU-e  of  Commons  on  January  11.  I'.'IT.  In  ordei  io  test 
the  demand  for  the  ta.x  lioinU.  the  government  determined  to 
issue  the  loan  in  two  forms.  The  lir^t  type  of  hond  called  for 
a  .")  per  cent  interest  payahle  in  thirty  year-  with  an  i>|)ti'in  of 
redenipti'ii  at  the  end  of  twelve  _\ear-.  The  ])rice  wa-  ti.xed  at 
£'.i."i.  vieldin<:  almost  exactly  ~>' 'i  jier  cent.  The  st-cond  was  a 
tax  compounded  hond  issued  at  par  and  returniuL^  1  per  cent 
redeemahlc  at  the  end  of  twelve  years  and  ru'Miiii'^'  for  t.'entN- 
ine  years.  The  -uh-crihers  to  the  loan  were  m  pa\-  .")  per  tent 
vn  application  and  the  halance  in  even  paNinent-  until   May  -JH. 

'  The   7  I'liii'.f  !!istor\  of  thr  li'ar.   veil    vii.  ji    -'>-. 

-  !<,:[.. ,rt  .if  W  Dr  ("a'tiinet  for  N'.ar   l''l",  L.mdon.   l''ls,  p    -Jll 

'  Ihc  7iMi.-.f.  jaiuiary  li',  H'lT. 


-}  III,      iiNWtlM.    III-I"I<V    or    CKIM     I!RI1\I\ 

Owners  nf  I'-j  per  cent.  ."■  pi-r  iriit  ami  *<  pir  niu  biau-  were 
jRTir.ittfd  to  cr.iivtTt  tlicin  iiit"  tlif  new  1-an  at  par.  while  the 
holder-  of  TrcaMiry  liilN  and  war  ixpen-t-  ccriitu-ates  coiild  coir 
\crt  thcni  at  di-c-tnit  "f  ■"■  per  cent  i'.  r  the  tir-t  and  ."> '  j  per  eeiit 
fnr  the  Mc-..nd.  I'nliki'  the  jirovi-iou-  for  the  pievion,  l.iaii-, 
till-  eiiterpri-e  -et  up  a  new  tyi>e  of  smkiiv^  fund  \\hicli  ua>  to  l>e 
iised  m  pnrelia-in-  -lock  uhene\er  it  fell  hel-w  the  i-ne  !>nee. 
I-:ach  nil  nth  s  of  1  per  cent  was  to  he  -el  a-idi'  until  a  -uin 
,,f  £  lo^iiiHijiiHi  \va-  acouniulated  to  purcha-e  st'Mk.  1  lie-e  coii- 
\er-i..n  pri\ile,ne-  had  the  ininiediate  etVei-t  of  rai-inj^  the  ])rice 
of  the  1'^  per  cent  l-aii-  to  '.<:>  \h\<  loan  d.id  not  carry  the 
ri^dit  ..I  c.  iiiver-ioii  a-  the  iirexi'iUs  one-  had.  evidencmi,'  the 
helief  oil  the  part  -f  the  ^'. -erninem.  at  any  rate,  that  the  limit 
had  heeii  readied,  ••■  the  form  oi  .attractive  term-.  .\nd  the 
fact  th.it  It  did  not  carry  conver-ion  rii,dits  \>>t  con-i'l-  and  the 
.". 'j  per  cent  war  I '.an  re-ulted  in  ;i  decline  of  coii-ol-  to  .>:.'•■  i 
and  of  the  :!'-  Jiei   cent  to  >- 1'',. 

An  aiialvr-i'-  ^'i  the  re-ult-  of  the  loan  of  j.ainiary.  I'.MT,  -Iimw- 
the  -;inie  .amazin.;  re-ult-.  The  aiiplicatioii-  through  the  I'.ank 
Mf  lui-land  amounted  t..  £-^  1 '.i..' -Mi.niio  ;ind  tlir.  .u-li  the  jio.-t 
ntiice  t''  i::n.71-^,'i"i>.  ((.nver-ion-  of  Tre.a.-ury  hill-  .added  to 
tl •';!•. 7  11, 7"'' I  .and  war  -aviu'.;  certilicate-  were  taken  in  the  -iim 
,,i  ij'.i,:;! II  1,(1(11 1,  ,a  -r.ind  t' lal  of  t !  .ood,:;! l', !>,",(•.  Counting,'  all 
-uh-criher,-.  including'  thw-e  who  h,.f,i;ht  certificates  t.f  le--  than 
i:,-. 'hI.  denomination-,  there  were  -.(kio.oiki  person-  participat- 
in•,^  dhe  hank  and  the  po-t  oitice  reporte.l  more  llian  j.ikki.ikki 
snh-criher-.  >'i  the-e  the  hank  reporte<l   1.(i-'.i,(iihi  and  the  po>t 

,,|Vn-f     l.(HHl,(l(MI.' 

At  the  time  of  the  i-sue  .  f  the  I-aii  the  tloatin.s,'  indehtedness 
wa-  i!,.M;.'.(i(t(i.(i(it'.  ,,f  winch  i  1  ,(».".;!.(mi(),(MI()  were  Treasury 
hills,  hut  the  conver-ion  .if  I'rea-ury  hills  and  h:\che(|ner  houd- 
for  the  ne\s  loan  reduced  the  amount  uf  the  lloatin,i4  debt  to 
£;i:»  1,00(1, (KM). 


'  flu-   liiiicj,  I-Lbiuary  -'.   I'-'H. 


U.\K    1,')AN>    AM)    riNANTIAL    I>i:VICES 


Cm  \Ni;r  mi    1  j  ia\    I'^lu  \ 


In  SfptrmlitT.  I'.MT.  tlic  );m.. criitn(.'nt  cliaii>;cil  it-^  p'llu-y  "f 
tiMil  ^iili^criptiMii  ]nTiii(h  t'l  r  till-  -a!f  iit  ImntK  aiul  hoj^.'iii  the 
c'\|)t.'rnm-iit  "i  tin,iin-int,'  thf  w.ir  Iiv  a  CMiuimt'ai-.  issur  nf  nati'in.il 
war  liiind-^.  I  lu'  fxpi-rmii-tii  mjh-iii'iI  well  with  an  avcra^'c  "i 
alxmt  (.■ii^htt'cn  n'iliiwii-  a  week  t'T  three  week-  ami  ilr'jjpeti  to 
£ln,unu,iti)ii  a  week  hv  tlie  !a-t  "i"  X.iveinlier.  The  iiimmuini 
amount  neeileil  as  stateil  liv  the  (  liaiR-ell  n-  of  the  |-'.\che(jiier  in 
his  >-pet  ch  I'll  the  iicca-inii  .  m'  the  l.i-t   N^le  i<i  ere' lit  ua>  tJ".- 

(iiHi, >  per  week.      Later  -tatenuiil-  nt  the  >ucce'-~  ■  >i  hi-^  policy 

wtTe  i)re-eiiH(l  li\  the  (,  haneell'ir.  March  i:i,  l'.'!"*.  At  that  time 
he  -aiil,  iluriiiL:  the  caitipiii;!!  week  eiiijiiu:  Marcli  7,  that  £lJT,- 
^T'l.-'t'i  'it  iiati'iiial  war  h'^iids  were  miM  tlir'Hi-^h  t!ie  T.aiik  "i 
i;n<.;laii(l.  an.l  >iiice  (  )ctoher  1,  \'.<\  t.  there  had  hec  £:.7()  nud  ooo 
ni  war  li"  iid-  S'  ,1(1.     lie  -p'  'ke  aN"  ■  i  the  ^ale  ■  't  pi>-t  '  't'tlce  i--.ue^ 

during'  the  smie  week-  a-  haviim  reached  £i','. .'mmi.     I'p  f  .  that 

t'liie  £l"'-.-^7'i.;.' |M  n\  war  .-a\iiii;  certiticate-  had  been  -old.' 

The  new  i->ue  wa>  a  c -nihuiati' m  "i"  ta..  distinct  torms  ni 
li"rriiuiiii:> :  i  1  •  -hurt  term  -ecuritie-  and  (  -  t  "ii  "  tap  -ale-  "  ut 
three  Imiids  ni  larger  dateil  -ecuritie-'  nf  -e\cn  \ear  •'  jier  cent, 
ten  \ear  •'  per  cent  and  twn  \ear  t  per  cent  inc"me  tax  cm- 
Ij.iimde'l  h"iids.  The  amount  ni  tlie-e  IkhkN  inr  -ale  wa.^  un- 
limited, the  deiiiiniinatinns  were  made  a-  k  iw  a->  £■">')  and  tlie 
redempti'iii  peri"''-  place<l  at  live,  r-eveii  and  ten  year-.  L'mver- 
si'iii  ri^ht-  were  incliuled  in  the  privilege-  "i  Imliler-  in  it  i  miy 
in  exchani;e  t'lr  anv  future  Lan-,  hut  l' ir  t!ie  previou-  '<  per  cent 
k  lan  at  £'■>'>  per  cent.  The  li 'tid-  under  ihi-  i.s.-ue  were  accepted 
t"r  death  'lutie-.  e\ce-s  pri'tit.-  i;r  muniti'ms  l''\chei|uer  payments 
thiiu^h  this  riulu  was  denied  tn  1'  rei,L;n  h"ld'.-r-  and  per.-nn-  ivit 
C(imm"n!v  resident  in  the  Kini;diim.  The-e  hoiuls  were  un  ?ale 
C'liitinu'iu.-lv  and  a  ureal  campai.t::ii  ut"  puhlicity  entered  upmi  tw 
brin<,f  them  int"  jiuhlic  imtice. 

In  askinj:  fur  ueeklv  purchase-  nf  the  l^^ird-  mi  this  scale, 
the  tinancial  advi-er-  "f  the  ;r'ivernment  are  askin,,  fur  nuth- 
^  Pa<:ij)ii,-n;,ir:  i>,-bjt,-s.  li'l".  vol.  mi.  p.  :.;J1. 


,-,i;  THE    riNANCIAL    HISTORY    OF   GREAT    BRITAIN 

in^  either  impc.ssililc  or  unreasnnal-'lc,  and  it  is  for  the 
moneyed  classes  to  respond  to  the  call  of  the  state  in  more 
generous  measure,  even  at  the  cost  oi  sacriticin<i  luxuries 
on  the  one  luuul  or  old  habits  and  prejudices  on  the  other. 
It  should  lie  done  for  patriotism,  hut  it  would  l)e  prudent, 
in  our  judj;meiit,  to  do  it  only  for  personal  interest.  1-or  if 
this  issue  of  war  lx)nds  is  withdrawn,  it  will  only  be  after 
the  government  has  been  taught  that  the  offer  of  good  terms 
al(ine  is  not  sutticientlv  potent  a  stimulus  to  voluntary  lend- 
ing, and  those  who  kept  their  monev  back  when  it  could 
have  been  placed  patriotically  on  so  favorable  a  basis  may 
well  find  that  the  alternative  is  distinctly  less  attractive.' 

CoxTiNrnrs  Loan  Policy 
As  shown  in  earlier  chapters  the  tinancial  policy  of  tiie  govern- 
ment has  changed  a  good  ileal  in  the   four  years  of   the  war. 
Wh.at   began   as  an  experiment   has  hardened   into  a   jiohcy   in 
that  it  has  been  two  years  since  the  government  called  for  a  loan 
of  a  fixed  amount.     The  continuous  loan  from  week  to  week  had 
at    least   the   advantage   of   drawing   from    the   savings   of    the 
people  the  funds  for  war  purposes,  and  avoided  the  necessity  of 
negotiating  extensive  advances  from  the  banks.     A  good  ,leal  of 
doubt  existed  as  to  the  success  of  such  a  policy  and  if  the  gov- 
ernment had  not  been  able  to  avail  itself  of  the  advance-  from 
the   Tnianl   States  Government,  the  success  of  the  plan  would 
have  been  much  in  fpiestion.     The  restrictions  on  new  issues  of 
capital  have  left  practically  no  security  for  investment  in  other 
than  government  issues.     Consequently,  the  stPtement  recently 
!iiade  that  the  government  has  no  present  intention  of  issuing 
another  fixed  war  loan  is  in  line  with  the  succes-  of  the  plan  so 
strongly  adhered  to  by  the  present  Chancellor,  P.ouar  Law. 

In  order  to  encourage  the  sale  of  such  Ixinds  it  ha-  been 
repeatetllv  suggested  that  a  jiremium  feature  -hould  be  made  a 
part  of  the  plan.  The  purpose  is  to  give  an  additional  cIkmcc  m 
the  purchase  of  government  securities  to  those  already  in  exist- 
ence. Such  bonds  would  be  issued  at  a  lower  rate  and  at  a 
di-count  with  the  possibility  that  in  six  month.-  or  a  year,  lortu- 


riu-   luutS.  yMiuber 


i;tl7. 


WAR    LOANS    AXn    FIN-ANCIAL    DEVICES 


57 


nate  holders  nii^lit  draw  a  larsrer  hnid  a<  a  prize  or  premium. 
The  thought  was  to  encnurage  investment  and  hrnig  some  groups 
to  work  ha'^der  in  order  tn  purcliase  ])remium  kinds.  The  pro- 
posal has  never  been  taken  up  largely  on  aecount  of  the  dis- 
crimination against  other  types  of  securities  and  the  inahilitv  to 
keep  up  the  process  ni  whetting  the  appetite  tor  new  premiums. 

The  Use  of  Treasi"rv  Rills 

In  addition  to  the  currency  issues  the  Treasury  has  relied  on 
Treasury  bills  to  meet  its  day  to  day  expenditures  expecting  when 
these  reached  too  large  a  sum  to  reduce  the  amount  by  the  pro- 
ceeds of  Exchequer  bomls  and  long  term  loans.'  .At  times  the 
Treasury  bills  have  aggregated  more  than  a  billion  jiounds.  On 
November  1,  ]'.»17.  there  were  fl'^.'i.T-JO.ooo  of  Treasurv  bills 
and  £lO,tliU,()00  in  Ways  and  Means  advances  outstanding.^ 
There  is,  however,  another  point  involved;  fearing  its  inabilitv 
to  get  tlK  necessary  funds  by  taxation  the  government  has  re- 
sorted extensively  to  this  method  of  getting  fumls.  The  Treas- 
ury bill,  a  government  obligation,  promises  big  ])avment  in  a 
short  period,  usually  three,  six  or  nine  months.  The  short  three 
months  bills  are  no  longer  issued  an  1  the  time  has  l)een  extended 
to  six,  nine  and  twelve  months.  These  are  otfered  in  the  market 
antl  were  sold  at  first  in  certain  amounts  to  the  highest  bidders. 
Later  this  method  was  abandoned  and  the  Treasurv  fixed  the 
price  and  sold  to  all  comers  over  the  counter.  .\  good  deal  of 
discussion  has  arisen  in  England  over  the  extensive  u>e  of  the 
Treasury  bill.  Some  authorities  have  argued  for  the  use  and 
others  have  protested  vig(Jrou■^ly  against  their  extended  use,  due 
to  the  influence  such  va>t  sums  of  paper  have  upon  prices  and  the 
artificial  inflation  of  banking  facilities. 


The  Exchequer  Bond 

The  l-'xchequer  bond  is  in  fact  a  corollary  in  the  iirinciples  of 

finance  to  the  Treasury  bills,      ai  tbe  nature  of  things  short  time 

'  London  Gazette,  .\ucust  1".  1  o". 
■  The  Times,  N'ovcmber  1,  1017. 


58  Tin:  i  in  wcial  history  or  gkeat  Britain 

paper  iall>  due  ami  the  i^ovcrnmenl  has  the  option  .)f  a  big  loan, 
short  term  hond-^  or  the  i-sue  of  another  l)atch  of  Treasury  hills. 
The  three  and  live  year  Mxcheciuer  bonds  luuc  been  used,  to  fill 
the  K'''p  ;"i'l  throuj,di  its  agency  reduce  the  amount  of  Treasury 
bills  from  lime  to  time.      The  ori-inal  prospectus  issued  in  con- 
nection .vith  the  sale  ..f  the  !-..\chequer  Innids  sp.jke  (jnly  of  five 
year  bo-ids.     These  v>ere  discontinued  January  1,  H'ltJ,  and  in 
their  place  the  f^'overnment  established  the  three  and   five  year 
bonds  payin-  •'>  i)er  cent  interest  with  the  option  of  payment  at 
t!ie  t:\u\  nf  eitlur  perioil.      In  commenting  on  this  innovation  the 
J..„ul,>n   liionuiinst  suggested  a  two  and  a  four  year  bond  as 
being  -till  better  fitted  to  the   needs  of   the  Chancellor.'     The 
large  i»ue  of  Treasury  i)ilb  has  forced  the  governm-nt  to  pay 
what   wa>  termed  an   e.\cepti..'nally  liigh   rate,   'i   per   cent,   for 
ICxchequer  I.oncb.     This  was   in   Xovember.    r.>l<;,  but   by   the 
attractive  otfcr  the  funds  were  forthcoming.     The  way  m  which 
the  matter  worked  <nU.  however,  emphasizes  the  inherent  diffi- 
culties .'1  sli.irt  term  bonds  as  compared  to  the  long  term  securi- 
ties which  in  a  measure  ironed  out  the  exigencies  of  the  imme- 
diate  future.     Chancellor  P.onar  Law  has  been  much  m  favor 
,,f  continuous  borrowing  with  its  Treasury  bills.  Exchequer  bonds 
.uid  long  term  securities  on  sale  at  all  times.     The  first  produces 
the  immediate  credit,  the  second  relieves  the  pressure  more  or 
less  tcmii-rarily.  antl  the  third  disposes  of  it   for  a  decade  or 
niMre.      in  December,  HUT,  a  ptiblic  announcement  was  made  that 
all  is.-ues  .if  l-'.xchequer  bond-  would  be  stopped.    This  left  Treas- 
ury bills  and  war  saving  certificates  as  the  only  issues  for  public 
borrowing,  the  puri)ose  being  to  concentrate  public  attention  upon 
the  new  war  loan  which  was  to  be  placed  upon  continuous  sale.- 


re 


IsSfE  OF  CfRRF.XCY   XoTES 

Since  the  opening  of  the  war  an  enormous  mass  of  new  cur- 
.^ncv  ha>  come  into  existence.      Formerly  gold  circulated  freely 


■■  //!,■    /  i)i:,-s.   himiiir\    1.    ll'lT. 

■•  /  .•iid'H  !-c.'n.  mm.  M.ircli  1".  l-'l". 


WAR    LOANS    AND    FINANCIAL    DEVICES 


in  Great  Britain,  Init  it  has  been  forced  out  ui  ■  rculatior  into 
the  reserves  of  banks,  and  paper  money  has  been  issued  in  its 
phice.  Just  how  far  this  process  has  gone  is  sliown  in  this  table 
for  the  two  years  ending  June,  l!il»i.' 


I'er  Cent 

Per   Cent 

Gol.l 

Incrtase 

Paper 

Increase 

(irtat    Hntain 

£4J.71'.".il(i() 

IDi;  i; 

£  llilMI.'ilHKMI 

.'.44  0 

I'ranco    ■ 

4(i.7:iiHMiit 

^•").l 

4-'.V.l()7'.(»00 

17.>.ti 

Italy 

lJ,->:i7jMM) 

•itJH 

im.ii-j.ooo 

144  ;i 

Russia 

ls4'ti7-<'(ino 

imp 

ii'.i.')>:u  Olio 

4^ttO 

Jap;in   ■  . 

ll,tiiii;.(iiiii 

w.sys 

li;/j;is  (Mm 

4!", 7 

l.ii-rmaii.\ 

•iOjKi.OiX) 

;•:(.(» 

4:i-,i]n»4!(Miii 

:i,")ii.;< 

Austria- Hiinga 

ry 

.17  li 

iH.'i.l  llt.OUll 
£:!OOJ,!U(t,iH)0 

1M'.).() 

C. ■!■"!. i,:i4ii. (Mill 

2tlH,0 

Up  to  a  Httle  more  than  a  _\ear  later.  .\iigu>t,  IT.  I'.'IT,  t'-'an  the 
table  above  shows,  there  had  been  issued  £47."),l'.'i>^.»L*7  of  i-tK' 
pound  notes,  £l.Mt,l>^•',,>^:;^  of  10s.  notes  and  £4l\40S.,000  of  cur- 
rency note  ccrtiticates,  Of  this  vast  sum  i,"03,74!),12S  were 
cancellcil  leaving  the  situation  in  this  form: 


OiitstaiiclMiij    1 1  notes 

Outst.indin;^   l"~    notes 

Outstaniiing  currency  note  certificates 


£l-.'.i,tiii:!..Vl7 
.■i:i,.'>ili,it;H 
14.!>.')0  000 


£17:i.l40,.5()5 

The  Treasurv  held  against  this  sum  gold  coin  and  bullion 
£:2>^,.">0(t,()0(\  government  securities  £l4<J,L'r.>.(5ri,".l.")  and  balances 
in  tlie  bank  £."),! >^lt,!•L".'  lis.  l.">d.  The  difference  between  these 
assets  and  the  outstanding  o!)ligation  is  termed  an  investment 
reserve  amounting  to  £7,lf.'.t,0',Hi  7s.  ."kI.  The  important  phases 
of  this  group  of  figures  are  the  great  mass  of  paper  monev  and 
the  amount  of  government  securities  held  as  assets  by  the  Treas- 
ury again.■^t  its  own  paper  issues. 

Loans  Made  Ahroad 

Great  as  has  b(>en  the  success  of  the  efforts  of  (ireat  Britain 
to  raise  loans  at  home  she  ha>  alone  and  in  conjunction  with 
France  placed  several  lean-  in  America.  The  terms  of  the  loan 
n>ade  in   HM,",  prMvided  for  the  i>sue  of  bonds  .$,")00,OMU,()()(f  in 

'  /..')i(/')i  lii-iiiio iiust.  .\lareli  ll>,  l!tl7. 


CO 


Tin:    l-INANCI AI,    HISTdKV    OV   GRK  ^T    liKllAIN' 


aiii-nnt  at  a  jirH-c  <  f  '•"■■  t-  the  undcrwritiT,-,  and  '.'^  t..  tlic  public. 
■|1k-  rate  wa-  ■"■  per  cent,  the  period  live  year>,  and  tlie  hcnd-  were 
cnnertihle  nit.i   I'j  per  cent  hMnd>  payable  in  litteen  \ears  and 
hel.Te    twenty-live.       The   price   at    which    the   l.'.nd>    were    ><<\d 
made  a  return  ni   :. ' ,  per  cent.     The  l-an,  Ih.wever.  was  ne<;u- 
tiated  lor  the  purju-e  mi"  maintaining  e\chan,i,a-  hy  the  e-tahhsh- 
ment  u<"  a  credit  in   .\ew   N'^rk  a.^ain^t   future  purcha-o.     The 
loan    ua.s   easily   taken,   the   majority   of   die   un.lerwriters   pre- 
fcrriiii,;  to  hold  their  suh>cription>  for  their  own  account,     h.arlier 
in  the   year  the    1  :i,uli>h  Ciovernment  had   received   tender-    tor 
3_'.-,(i,(r(  1(1,1100  <,f  live  \ear  I".\che(pier  bonds  liearint,'  '■'•  per  cent 
and  sdlin^^  at  a  price  which  brought  :;•  s  (ler  cent  to  buyers,      1 1 
second  secured  ^old  loan  by  the   Tnited   Kingdom  wa-  broui;  ,. 
,,ut   sooner   than    was  expected.       'idns  loan    was   ne,^'otiate<l   iii 
October  of  r.Mf.  for  ^:;oo,ooo,ooo  at  .">'-  per  cent.     Onedialf  of 
the  loan  matured  in  three  years  and  wa-  olTereil  to  the  imbhc 
at  '.•'.''),  the  second  half   was  for  live  year-  and   sold  at  '.t^'-. 
This  loan  was  -ecured  by  collaterals  coUMstini;  of  .\mencan  and 
e'anadian   railway   stojks  and   Government   securities  of    I'-ritish 
Dominions,  .viuth  .\merican  ( lovernments.  Lulia,  Japan.   !-.,i;ypt, 
and  India,     The  !■   m  was  repayable  in  L'nited  States  gold  coin 
,,r  in    r.ritisji   sterling  at  ?4,^i;i.,   per  pound         Ihe  attitude  of 
American    bankers    toward    these    loans    was    to    mcourage    the 
offerings  in   the    New    York   market  as    fast   as   they   could   be 
absorbed.,  hoping  in  thi-  way  to  facilitate  foreign  purchases  and 
to  reduce  current  gold  mi,,ortations.     The  entrance  of  .\merica 
in.to  tlR.  war  changed  the  whole  course  of   I'.riti-h  linancing  s., 
far  as   the  placing  of   loans  in    America    was  concerned.      'Ihe 
government  has  m.w  become  the  banker  and  advances  are  made 
in  money   in  exchange   for  the  .ibligatious  of   (ireat    llntam  at 
the   same   rate  of    intere-t   as   that   on   bonds   or   certificates   of 
indebtedne.-s  which  the  .^ecretarv  ■  t   the    I'reasury  -ell-,  to  rai>e 
the  neede.l  fund-,'       Up  to  March  is.   1 '.•!■>.  <  ireat   Britain  has 
received  $i',:l',»o,ooo,ooo.=  . 


I  lu-  JiniaUst,  (  kt^'biT  --,  l!"'. 
;,J,w/  /u-,?,vtv  l<i<!!.:ni.  .Xpri!,  l''l' 


•J70 


CHAPTER  VI 


Foreign  Exchange  and  the  Dollar  Security  Scheme 


On  tlie  face  ni  it  tlicre  st'om-  in  lie  no  i^reat  iinpnrtance  in 
the  ])rnl)Iein  of  exchange  as  a  war  (luestinn.  \et  it  came  tn  lie  a 
war  loan  (|ue--tiiin  of  va-t  inipiTtance  to  (ireat  I'.ritain  in  nieetin.ij 
war  eNpemlitiires  aliroad.  In  previous  cliapters,  II  an.l  III, 
somethinjj  ;if  tlie  -itiiati'in  tliai  faceii  Mn,i;lisii  i'. irei;,ni  trade  at 
tlie  opening,'  of  tlie  war  wa~  !irou,i;ht  to  the  attention  of  the 
reader,  (ireat  liritain  enji'\ed  an  nninen>e  world  trade,  thus 
hrii'Ljini;  to  her  peo])lt.-  the  return-  r r. im  freiL,dit,  insurance  and 
hankiiii,'  profits  arisini;  lUt  of  the  hu-sncss  of  hanker  and  carrier 
to  the  world.  When  the  war  came  hills  nf  cxchan.Lje  >uddenlv 
ceased  to  he  current  and  the  machiner\  of  international  exchanjije 
hroke  d'Avn.  Rates  of  exchan;^e  I^  r  ^terlin<;  hills  on  London 
rose  to  unheard  (rf  prices.  Tlie  \er\  ^nccesi  of  the  lai^dish 
financial  system  in  !a\iii;,'  the  world  >uhii.ct  to  it  stood  in  the 
way  of  its  continuance  when  war  stopped  the  movement  of  i;o(ids. 
I.  enturio  of  world  trade  hail  ^i\en  the  h'.nuli^h  people  cnnrmdus 
investment  ahmad  with  annual  interest  and  dividend  paxinents 
of  hundreds  of  million-.  It  has  hecii  stated  that  the  Lnited 
Kin,i,'dom  had  not  le->  than  £4, nun. (Kmi.ikk)  invested  in  foreij^n 
countries,  one-half  of  which  was  ni  .\ortli  and  .'-^'  'itli  .\merica. 
In  the  I'nited  States  the  holdinj^s  were  estimated  at  SK"'"",- 
0()0,(Mi(i  and  in  Canada  at  S2..".0(>,0(Hl,()(»((.  Ihc  j,,int  stock 
hanks  and  accejitance  linuses  ceased  on  the  declaration  of  war 
to  purcha>"  forei.LMi  hills  and  heL;an  calling,'  in  their  loans.  This 
action  e' .iiarras>e<l  the  wli.:le  pri  cess  of  payment,  not  .ml .  uf 
dividends  and  of  interest,  hut  of  debts  due  for  insurance.  frei:,dit 
and  f^^oods  ;is  well.  Such  ,i  re-uIt  was  the  natural  outcome  '  f  a 
war  in\olvin.t^  ;i  con-i  lerahle  nunil)er  of  Lrreat  Powers,  hut  the 
(litticulties  ..f  exchange  even  after  tlie  adjustments  brought  about 

61 


(JO  Tlli;    IINAMIM.    IllSrnKY    OK    liUr.Al     ISKITAIN 

|,v  ilu'  fUUT-nH-v  nuMMirc-,  had  l>ccn  nia-lc  liasc  cntinucd  and 
will  uiid.iMl-u-.llv  CMiitiiuK'  .lurin-  the  u  IimIc  cair-c  ui  the  war 
ami  t'lr  >>  'inc  tniK-  alter. 


KKHi^  IN   ihi.  Imikkk.n  l-.xi  iiani;k  I'k.ihi.i:m 


\hv  pr'  MiMii  Ml    f..rfiL;ii   eNchaii-e  may  In-  (Hviilc(!. 


thcrel'irc, 


nic  and   di>- 


int-  t\\M  dt-tnu-l  i>cn..d^;  tlic  tir-t.  tlie  tinic-  -I  panic  a 
ni-ani/ati-n  at  the  Muil.rcak  "i  the  v.ar.  and  the  -ec-nd.  the 
li-i^-tlienni-  period  -i  the  uar  .Uirin-  which,  there  i^  a  -radnal 
accunuilatin;^  etlect  -I  the  war  cnditi-ns  and  uar  expenditure^ 
up.  .11    the    hnaiicial    relati..n^    m    each    nf    the    c-nihataiU^    and 

iiential>. 

Idu.  Iir-t  peri..d  lia>  heen  -iveti  c.  .iiMderati.  .n  at  -.me  len.L^th 
111  earhcr  di.ipicr-.  tlie  ^ecnd.  il  pur-ue.i  m  aU  it-  pha-e-  wnuM 
carrN  ihc  mve-ti.i;ati<.n  mt.i  detail-  uhich  can  n.  .t  he  h.lL.wed  m 
a  lM...k  ..I  limite.l  scjie.  .\-  i-  indicated  hy  the  title  <>\  this 
chapter  it  i-  t.-  <  .ne  jiha-e  -t"  the  -ituatiMii  in.  .re  than  the  .  .ther. 
that  -pecial  einpha-i-  i-  l>.  lie  paid,  that  ..t  the  d..llar  -ecurity 
.-cheme.  I'.ef.'re  eiiterint,'  ni)..n  it,  h..wever.  it  -eein-  de-irahle 
iM  ^dance  l".  .r  a  hnef  period  at  the  .L^eneral  e-\chan-e  -ituati.  ii.  ^ 

dhf   ..uthreak   Mt    the   war  created   a   wi.rlduule   demand    f..r 
exchange  Mil  i...ndMii.      .Ml  the  hankin.i,'  center-  m  the  wrld  were 
l,,.,kiii-    i'..r  -terlin-  exchan.L^e,   -eekin.i;  t^  convert   their  credit> 
int. I  -terhn-.      .M.Miit  iie  niily  place  in  the  wurld  where  iiiMra- 
t.iria  ha.l  n^t  heen  .leclared  ua-  in  the  Tinted  State>  and  in  cn- 
-eipieiice    the-e    cuintries    were    tryiii,L,'    tn    use    their    cre.lit-    m 
\inerica  t..  pav   l.und..ii.      New   \nvk  culd  ii.  .t  n-e  her  ..l"f-et> 
auaiii-t  the-e  credit^  >m  acc.unt  of  the  m..rat.:ria.      In  ..rilinary 
time-  the  interiiati.inal  hanker-  arran-ed  the->e  credit>  and  dehit. 
.,1  individual-  and  o.rp..rati.  .n<  tn  ..itset  die  an.. ther;  hut  nn.ler 
tlK-  c..ii.liti..n-   th.i-   wa-   imii...-ihle   s..   that    Xew    \'.'rk.   a-   the 
a'luer  >>\  .\merican  finance,  was  called  fi  iia.v  • -ne  -ide  <.t  a  rnn- 
ninu  accmit    t..r  the  wh<.le  w..rld.     ddie  he-t   that  the  dehtors 
CMiiM  d..  ua-  t..  pav  int..  a  hank  and  n.  tiiy  credit. .rs  that  the 
acc.unt  u.is  at  tiieir  .li-p.wal.      .\  -ituati. .n  .'f  thi-  kind  eiieuur- 


i-uia;ii;\  i;.\(  ii.wci;  .\.\ii  i  hi;  dmi.i.au  >ki.-ikitv  >liii.\ii;        i;:; 

a<;c'(l  -nl,|  (.■\]iMrlati..n.  The  nutctnc  wa-  tlif  crratiwn  ,,i  a  \\'\v 
^  i^rk  liankcr>'  ciiUiinitti'i-  am!  the  c-t;'.lili-~liuifnt  I'l  a  Slno.diiii.ooii 
,i;<ili|  tniiil  til  l)c  u-cil  m  tlmuciIn  iiij;  tin.-  (.■\clianj,'f  ^ituatiMii  in  New 
^M•.■k.  In  1  •  ccinhcr.  lull,  cNcliaiij,'c  rclatiwn^  hciw  cc-n  l.dii.ldii 
anil  W'W  N'nrk  were  Hernial,  I)Ut  in  I'\-!inKir\ .  I.Mndi.n  (.■sclianLje 
]ii  .W'w  ^■|lrk  Went  tu  >^\.~'-K  the  Ii-ui'-t  iiniiit  cvit  kimun  u\)  \<> 
that  timt-.  I. linden  hail  c -nu'  in  ,m  \v\v  N'l.rk.  hiii  the  ci  .st 
"f  -hippint,^  ^nlil  acm-s  the  Atlantic  \\a-  pn  ihilntivi-  inidcr  war 
C'lnditii  IN.  'riu'  wlmle  situatiiai  was  the  reverse  nf  the  ci'iidi- 
tioii.--  of  the  last  part  nf  the  previuu.-  \ear. 


Tfii:   Sti:ri.i\i;   I'xi  ii.wi  .;  Sir 


lA  ri(i\ 


P.y  January,  IMi:,,  the  SKio.diin.iiitn  estimated  annual  indehted- 
ness  due  in  h'.nuland  frmn  American--  had  heen  extended  <<r  re- 
invested and  a  ci.n-iderahle  hndy  nf  securities  purchased.  Thi- 
in  tact  was  the  cnly  way  likely  to  he  available  in  jjavin^'  the  trade 
halance  a-aiii-t  dreat  liritain  -incc  she  c-uld  in  it  i)ay  in  -.  ild  <,r 
settle  in  ;.;iNids.  It  was  trmn  this  vieui)Mint  that  the  I'hancellur 
nf  the  I".\che(|uer  stated  ( Ireat  liritain  cuuld  i)a\  the  e\])enses  of 
the  war  fur  the  years  I'nmi  the  proceeds  of  her  forei.ijn  invest- 
ments. In  March,  I'.M.'i,  -.terlin.i;  eNchan.ue  went  to  .1  lower  ti;.;ure. 
The  P>ank  of  kji^land  used  it>  >tore  of  ^i.jd  to  |)a\  exchanj^e  at 
the  rate  of  Sk>^l.">,  hut  it  liecame  iiicreasin,<;ly  clearer  as  the 
\ear  advanced  that  a  lar,t;e  balance  in  fa\or  of  .\inerica  u,is 
accumulating.  I'.y  jul\.  I'.U:.,  the  American  current  indehtt, 
ness  in  London  had  been  wiped  out,  speculative  holdings  m 
American  .securities  li(iiuilate(l  and  many  thousands  of  .securities 
sold  in  Xew  \'(irk.  Despite  these  condition^  j^rold  continued  to 
come  and  the  sterling'  rate  to  fall  to  Sl.7<l'i.  Meantime  the 
Ottawa  },'old  account  had  been  exhausted,  so  that  the  wav  out  of 
the  difficulty  pointed  to  the  borrowin.t;  of  .Vmerican  securitic-,  in 
(Ireat  Britain  and  pledgin-;  them  in  America  as  the  basis  of  an 
issue  of  notes.' 

'1  he   exchan,i;e   situation   t,'rew   steadily   wor-e   1)V    .Sei)tember, 

'  Xatu/nal  City  Bank  Hullctiii.  July,   TJl.'). 


Ml 


m 


(J4  Tin,    I  INANCIAI.    lll>rul<Y    OF    r.UEAT    liUITAIN- 

I'.tl.-.,  when   >tfrlinK  cNchaiific   fell  to  $4,:.:.',   ,lo>pitf   the   fact 
that  .S:,(»n(i(i .11(1(1  in  -.,1(1  had  I't-cii  traiisfcru-il  t.'  America  and  as 
much  m-ie  ni  the  f.-rm  of  securities.      Any  further  decline  uas 
disi-rrou^  U>  the  i-'.n-loh  and  eniharrassiuK  to  American  hanker-. 
The  liuted  State-  cuuld  n.  4  well  u.-e  UMire  f;old  since  the  amount 
received  in  the  previous  nine  months  amounted  to  $l'(»o,(»ih>,()()(> 
and  the  annual  pr(Mluctiou  was  fully  SlOd.lMUi.ooo  m-re.      Such 
a   -ituati.in   oadd   imt   well   continue   without   some  attempt-   at 
Lettenneiit.      With   thi-  m   view   the   Anglo-Frencli  (ommission 
vi-iied   America  m  (  )ctol)er  and  hegan  at  once  the  ne^'otiatiuns 
f,.r  a  lar-e  Inan.      The  plan  tn  re(|uire  the  dep^Mt  of  .\merican 
-ecuritie-  a-  collateral  was  seemingly  not  fea  ihle  in  view  (U  the 
need  ><i  ha-te  -nice  sterling  exchanj^e  had  ^'uue  down  to  St.-t'.i 
and   the    fact   that   the    I-jikHsIi   Government   did   not   own   any 
American    securities.       The   conclusion    wa.-   the   placing,'  of    the 
Auiil    l-'rench   loan  cif  S:i(H)  ood.ikmi  and  tlie  depositing  "'    '1'^* 
proceed-  m   American  hanks  as  a  means  of  purchasing  -upphes 
for  the  i:ni^li-h  and  l-'rench  C.overnments. 

•Till-    Dollar  SrcriUTV   S(.^heme 

The  first  F.ngli-h  allusion  to  the  use  of  American  securities  as 
a  mean-  of  controlling  sterling  e.-;change  on  New  York  was  made 
in  //;.■  Tuiu-s  im  Xovemher  17.  I'.U.V  Prior  to  the  coming  of 
the  \nL;!-l"rench  LommissiMU.  hanker,-  of  New  York  had  urged 
the  pledging  oi  securities  for  loan  collateral.  The  g^ld  situation 
wa-  artificial,  the  goKl  ua-  ditVicult  to  u-e  as  a  ha-is  for  the 
lialance  -f  the  e.\change  hetween  London  avd  New  \ork  so  that 
some  other  mean-  had  to  he  found  to  affect  the  situation.  1  he 
government  did  not  o,u  n  -ecuritie-  .and  to  acquire  them  was  at 
ar.\  rale  the  tir-t  prohlem  to  work  mu. 

Ihe  ]>!aii  u.is  entered  up.  n  '.he  latter  p.art  of  I'.U.'.  and  con- 
teir.pl.ited  the  purcha-e  or  the  Imrrowmg  of  .\mencan  securities. 
lU'ginmng  with  an  option  for  the  lidder  the  plan  of  realizing 
.American  secnritie-  proceeded  in  its  final  f'-rni  to  a  compulsion 
lax  u;     .  :ill  -ecuril\  holders  wh.-  did  not  surrender  ilieir  holdings 


KUKKIGN    KXCHANiil.   AM)    IllK    1H)LLAK    .sKClKllV    >Clli:MI-: 


ti.) 


t(i  tlic  govcriiiucm  lor  purchase  or  l(jan.  In  cxplaiiiinj;  tlic  plan 
the  (-  hancellur  saitl ;  ' 

The  government  wanted  to  ,L;et  the^e  securities,  as  far  as 
possible,  into  one  hand  so  that  they  iniyht  l>e  ccintrolletl  and 
used  for  tlie  puri)o>e  of  ])ayinf,'  our  debts  in  the  Lnited 
States.  The\  i)elie\ed  that  these  securities  would  afford  us 
a  very  ,i,'reat  resource  which  would  be  fully  sufficient  to  meet 
(jiir  liabilities,  and  therefore  to  maintain  a  good  level  of 
exchanj^e  with  the  L  nited  States  for  a  period  which  he 
trusted  would  last  as  lonj^j  as  tlie  war  would  last.  The  .t,'ov- 
ernnient  recognized  to  the  full  that  it  was  as  much  to  our 
interest  as  it  was  the  interest  of  the  Lnited  States  that  noth- 
ing should  be  done  which  would  embarrass  their  market  or 
injure  their  financial  business,  and  therefore  the  government 
would  certainlv  exercise  every  care  that  ntithing  was  done 
to  embarrass  the  tinancial  interest  in  the  I'nited  States. 

In  the  debate  that  folic )wed  it  was  declared  that  a  national  register 
should  be  established  and  all  owners  of  American  securities  be 
recpiired  to  register  them.  In  fact  a  financial  Lord  Perby  was 
wanted  if  the  plan  was  to  come  to  a  successful  conclusion.  How 
proplietic  this  statement  was  is  clearly  evinced  in  the  govern- 
ment's acceptance  of  compulsion  as  a  necessary  attitude  in  the 
successful  u^e  uf  securities  for  the  purposes  of  the  government. 


The  Dktails  of  the  Plan 

As  originally  presented  the  plan  had  three  parts.  The  tivst 
of  these  may  be  called  the  purchase  scheme  which  provided  that 
the  government  might  buy  such  securities  outright  ;it  the  New 
York  quotation  and  pa\-  for  them  in  tive  per  cmt  l'.xche(|uer 
bonds.  The  second  part  permitted  the  owner  to  loan  his  securi- 
ties to  the  government  for  use  as  collateral  to  Treasury  loans. 
If  he  did  this  the  <iwner  continued  to  receive  interest  tir  dividends 
ar:d  a  bonus  of  one-half  of  one  per  cent  on  the  face  value  of  his 
loaned  holdings.  The  third  part  gave  the  government  the  optinn 
of  selling  the  borrowed  securities,  if  necessary  to  do  so,  in  which 

'  The  Times,  December  11,  1015. 


ca^e  it  .i^rcfil  I-  .nM  -''j  i^t  cvm  {■>  the  avtTa^c  of  the  liij^li 
and  h>\\  Nfw  N<irk  iniMtati'  n-  mh  the  i!a>  "i  the  -ale.  In  tlie 
eour-e  "i  a  few  in.'ntli-  the  jilan  ua-  inaleDall)  elal;urale<l  and 
tu"  t\\}.>  "f  -chenu-  -et  u]),  Kumwh  a-    \  and  l'>. 

While  the  .u-vernnieiit  evidetitlv  |ireferred  tn  liuy  securities 
i.utrii;!it  a-  -hiiun  in  the  remark  >>\  riianeelldr  McKeniia  "that 
the  L;Mvernment  winld  he  ready  1. 1  |)iireh.i>e  £  Ioh.miki.mim)  ,,t 
seeuntie-  in  a  furtin^ht  "  the  A  and  !'•  -cheine-  provided  fur  the 
Iciannij,'  nf  securities  td  the  ^M\ernnient.'  Scheme  A  ]iermitted 
the  de])M-it  ><\  >ecnritie<  f'lr  tud  '.ears  with  the  ojitinn  "i  trans- 
ferrinj;  them  tM  the  Trea-ur)  f ■ 'r  a  Inn-er  perind  under  the  li 
l)art  <<i  the  plan,  and  at  the  same  time  i)ernntt!n,t.;  the  sale  >'i 
the  -ecnrities  under  certaii  nditi..ns.  The  ^aMier  was  t,,  have 
in  addition  to  hi.s  dividends  <ir  interest  '-  per  >-ent  nn  th.e  face 
\alne  -f  his  security.  In  case  the  lreasur>  found  it  neccs-ary 
til  sell  he  was  to  have  -'-  per  cent  on  value.  To  the  lender  was 
preserved  the  ri.i^ht  to  sell  ])roviding  the  securities  were  released 
in  .\ew  ^■ork  aj,'ainst  payments  to  the  Treasury  agents  there. 
In  case  the  I  reasury  s,ild  the  lender  could  huy  hack  inside  of 
11  da\s  1)\  the  pa\inent  of  the  market  jirice  m  dollars.  On 
Decemher  If',  I'.Mf..  the  .\  jiart  of  the  scheme  was  withdrawn 
and  the  transactions  carrie<l  on  under  the  I'  plan. 

I'his  plan  provided  for  horrowin^  securities  lor  tive  years 
thou^di  the  Treasury  was  permitted  to  return  them  on  three 
months'  notice  after  two  years.  L'luler  an\  circumstances  the 
lender  was  to  receive  '-  jier  cent  per  annum  on  the  face  value 
whether  sold  or  not.  If  they  were  sdld  the  lender  coiild  re(iuire 
the  i^overnment  to  rejilace  his  securities  of  the  same  character 
ami  value.  If  they  were  sold  he  could  ha\e  the  deposit  returned 
in  cash  with  a  bonus  of  '<  per  cent  tos.;ether  with  the  accrued 
interest.  .Ve^otiable  certificates  were  issued  for  all  securities 
lent  to  the  Treasury.  Despite  tlie  attractiveness  of  the  plan  it 
did  IK  it  hrinu  in  as  manv  securities  a.'  \\ere  h'  peil  for.  In  coii- 
se(|uence  a  -s.  penal  t.iK  was  placed  on  the  income  of  listed 
securities   not   hrou<;ht   to   the   government.      The   criticism   of 

'  77k-    I'lmci.  DectmbiT   11,   1"1'>. 


1(|R('.I(,N    i   XCllANCl.    AMI    Mil     IMIIAU    -riIHir\-    -illlMI 


>clitMiif  .^  wa-  iiKiiic  "11  till'  ,i,'r"unil  that  it  ilnl  iMt  prnviilc  for  a 
miai.iiitcc.l  price  in  case  "t  >alc,  uliilt-  scIk'hh-  K  \\a>  >  lijiTtcd 
t"  Ih-'CiJ^c  "I  till'  ali>riKf  iif  t!u-  p'luor  dt  -aK-.  I'mlcT  ilic 
in-'ditR-il  onn  in  liicl!  -clicinc  11  afterward-  ai)pcarfd,  >c1k-iiic 
A  Iiavin;,'  lieen  u  ithdraw  i,  tliese  criticism-  were  adnjitcd  and  the 
neu  -clu'nic  cnil)raccd  In  tli  a<lvaiita^'c>  tliiis  j^ivniL;  tn  thr  Trcas- 
nr\  ilic  nrcfssar\  riijht  >i\  pnrcliaM-.  Hmw  far  the  >clieiiu-  went 
in  hrin^inj^  •»ecuritie'>  tn  the  "rea-ury  i-  well  indicated  li'.  the 
-tatenient  in  'I'ltr  i  iiii.s  '  tn  tl  et'fecl  that  ■  f  the  $J..'aiii.niMp.onii 
uf  .\'  cruaii  -ecuritie-,  iiut  le---  tliaii  .$•_', (m»(i,O()0,()  lo  had  been 
depi)M.  d  li\  tlii'ir  I' ii^li-!i  holders. 

The  •'"nrth  !•  ',  of  -eciiritie-  carrviny  the  niimher  t"  '•'"!•  \\a- 
pulili-hed  May  '■.  I'.'IT.  Thi-  wa-  the  la-t  li-t  a-  it  ])racticallv 
exhansted  the  luimher  i.\  -ecnritie-  subject  t"  the  J-,  tax.  Anv 
exten-inn  i.f  it  would  ha\e  tn  include  the  -ecuritie-  which  the 
holder  had  n  '  had  the  (ip|)ortunitv  nf  lendini;  to  the  liovfrnment. 
A  few  days  later  after  the  issue  <>{  the  -tatenient  al>ove,  the 
Treasury  declared  its  jjurpusf  to  di-continue  the  horrowinc;  of 
securities  under  scheme  11  except  in  list  s'lliject  to  the  i)enal 
tax.  thouf,'h  alx  ut  tio  per  cent  of  these  would  he  subject  t<'  the 
scheme. "  The  declaration  of  war  b;-  America  relieved  the  pres- 
sure upon  the  di'iiar  security  scheme  and  .mediatelv  affected  the 
jirice  of  sterling  exchanj:;e,  carryinj;  it  to  $4.77'4.'  The  whole 
exchange  situation  was  thus  altere  and  the  responsibility  of 
seiulini,'  ,£;old  to  Xew  N'ork  materiah  reduced..  Loans  t^  Great 
Britain  liy  the  L'nited  States  created  the  credits  needed  in  Xew 
\'ork,  and  the  Treasury  wa-  able  to  announce  in  September  that 
certain  securities  are  withdrawn  from  the  list  as  the  Treasury 
has  sufficient  for  its  purpose. 

'  The  Times,   lanu.irv   li*,  1917. 
'Ibid.,  Mav  I'-i.  li'i:' 

'Ibid.,  .April  11.  i:h: 


CHAPTER  VII 

The  En<;lish  Taxation  Policy 

Tlic  foiniilatii'ii  of  i-iij^li-li  tiiiaiicial  ]>'j1icv  in  t'.io  cnndiu-t  '<i 
war  ha-  ln'iii  ami  i-,  (lf-]jin-  tlic  cntici-m-  im|ilyiiij4  the  conirary, 
the  sv>tini  Ml  taxation,  1  lio  currt'iit  (.■\|h.mim's  ,i|  j^'t .vcninu-iit 
imtvt  lie  inaiiitanu'd  and  tlir  iiiti-rot  and  -iiikmiL,'  luiid  of  the 
IMilihi.-  dilit  111/  |Mid  l.y  taxation.  In  tl\i'  Im.il  anal>-i-  a  war  i^ 
tmaiu-i'd  from  -a\in;^s  wliieh  .nay  In.-  hroiii^ht  uito  ;^overnnR'nt 
liancN  li\  loan-  or  taxation.  I  he  i'Con<  iiiic  etti'Ct-  of  tlie  two 
inetlioiU  dil'fir,  liUt  no  nation  can  tiiiaiu't'  it-  .\ar-  !i\  taxc-  alone 
or  i.\  -a\ni.!4-  alone:  lience  ihe  polies  of  taxation,  -uiijileinenti'd 
l)V  loan>.  liiH-oini--  the  tixed  national  jiolicv.  In  the  o])inion  of 
inan\-  hai.^Iidi  pnhlici.-ts  the  Tinted  Kin^'doni  lia-  iioi  u-ed  the 
power  of  taxation  ^I'lVieienllN  to  ])rcvent  the  drift  into  the  third 
method  of  tinan'MiL;  war-,  that  of  the  n-e  of  eonipnl-or\  loan-, 
the  i— ne  of  p.iper  nioiie^'.  Ihere  nui-t  al\va_\s  eome  an  end  to 
li-rrowin.i.,',  forein.L;  the  i^overnineiit  to  re-ort  to  increa-ed  taxa- 
tion to  pav  the  Imrden-  of  intere-t  and  >inkiii.u  fund.  There  is 
alwav-  a  tendenev  to  let  t'ni.ance  drift  aloni;  the  line  of  least 
resi-tanee.  Now  and  then  miin-ter>  ,i;et  away  from  thi'.  tendency 
under  the  lire  •  f  eritici-ni,  Imt  the  cunscrvatisni  of  a  people 
eau>e-  thetn  to  I.  „  .k  a-kance  at  new  ])roiects  of  taxation  and  the 
ii.itional  poliev  thu.-  drift-  again  into  uld  channel,-. 

■r.wi-  iM-    rm:  Imk-^t  lifur.KT 

The  Ilovd  (ie-rije  hud-et  of  .Xoveinher,  I'.M  I.  increased  the 
rates  of  tin-  prev.ou-  peace  li-t  and  to  the,-e  hi-'  .\pril,  I'.M.'), 
hiuh^et  added  no  new  taxe-:  the  MeKenna  hndget  increased  tlie 
rate-  of  the  ( ie  T^e  propo-^al-  while  the  r.oiiar  Law  Inidget-  faced 
bv  an  .-'dditiou  of   t  l.<i.'ai,(itiu.(in()   in  the  expenditure  dtn-ing  a 

is 


1111.    I.M.l.lMi      lAXAilti.N"     P'li.IiY 


t'.O 


^in>;Ic  year  did  imt  add  mu  tave^  .T  venture  iiit"  tield-  entered 
bv  liis  predece-Mir- '  In  tact,  an  e\aiiniiatiMii  ><i  tlie  l',n},di-.li 
taxati"!!  "f  tlie  war  .~1imu>,  taking;  llie  Imrdiii  'if  tlie  war  intt) 
ci'ii^ideratuiii,  a  >uri)ri>inL,'  adhereme  tn  .i  limited  nnm'ner  nf 
taxes.  There  certainly  \\a^  [ilenty  "1  nioni  tHr  a  Imi.i^er  array 
of  indireet  taxe>  than  have  heen  ini])n>ed.  I'erhai)-.  the  vieu- 
jii  lilt  i>  bri'ii^dit  tint  in  the  statement  "i  the  1. 1 Mid' in  I  iiiuw  as 
earlv  a^  h'ehruarv,   UMi;.  that 

the    >in,i,'nlar    -pectacle    \va>    pre^eiited    nf    the    tax    ))aver-. 
lieaded  i)v  the  eity  iirj^ini;  the  <;iivernnient  to  tax  them  well; 
and  when  the  neu   war  taxes  were  jirdpused  in  the  sui)ple 
meiitarv  budget   ui   the  autumn,   >urpri>e  wa>  expre.-scd  at 
theii  moderati'iii  a-  a  wlmle." 


Ibiwever.  as  the  war  ha-^  j;i>ne  mi  it  is  beiiiL^  clearlv  'leninn- 
strated  that  b"th  increase^  and  new  furm^  nf  taxes  will  b.ave  t'l 
be  resorted  to  in  order  to  fultil  the  i-".n^di-h  b"a>t  that  iT-rmal 
cxi)en'~es  aiul  the  ci.-t  of  interest  and  sinking;  fund  >hall  always 
be  met  bv  taxation  and  imt  by  burrow in.s,'s. 

The  new  taxes  impn-eil  by  the  sujiplemeiitary  budf;et  of 
XoveniluT,  I'.tll,  established  a  ti>oal  pnlicy  tliat  ha>  been  pretty 
well  adhered  to  durint,'  tlie  war.  The  new  taxe-  jir'ip'ised  were 
estimated  to  produce  £ir>..">iMi,(i(i((  in  the  remaintler  "f  I'-'H-l.". 
(April  1.  r.'l.'. )  and  £r..".,(>n(»,ti(Mi  ni'ire  in  the  ti-cal  \ear  It'l.'.-lO. 
Uf  the  amount  t'l  be  derived  in  this  way  one-third  wa>  t  come 
from  customs  and  excise  and  the  remainder  from  additional  in- 
come taxes.  The  burdens  for  the  customs  and  excise  were  placed 
upon  tea  and  lx.'er  ami  the  ,iL,'radin.^;  of  incomes  into  three  clashes: 
earned,  jiartly  earned  and  partly  unearned,  with  exemption  at 
the  bottom  of  earned  income^.  These  provided  the  basis  for  the 
revenue  from  the  income  tax. 

The  maker  of  the  first  war  bud},a't  was  confn'iited  by  a 
number  of  unknown  factors  and  checked  in  his  le\yin{.^  of  new 
forms  of  taxation  by  what  he  re!,'ariled  a^  well  established  prin- 

'  Loi'.di'H  li.c,'ito)iust,  June  ".  1-'17. 
'  The  limes,  February  7,  I'Jlii. 


.'I 


illi;   riNAM.  lAi,    iii.>iMk\    111-   i;ki.\r    i;uir.\ix 


cipk'^.  I'ir-t  \va>  tin-  Irn.u'tli  "i  'l'^'  \\'ii'.  v:!ri'  ii--l\  f-timatol  at 
•i\  111'  iit'.i- 111  tlirit.'  \(.-,ir>,  aiu!  whnllx unknnwn  t"  iIr- I  hanccll'T 
:■]  till-  l-.M-lii'ijiRT.  Sii-iiiiil  \\.i^  till'  ilail>  rair  "i'  t.-\jiciiilitinx  that 
lia>  ii"\v  luriK-il  'Hit  !■•  Ill'  cn'rni"ii-ly  Iar;^'(.T  than  an\lMi(l\  i-vcu 
(Iri'aitifl  di'  at  the  ■  ])rniiiL:  "t  the  war.  In  thi-  la-t  fact-ir  vmtc 
iifi  rlili-ni>  lit'  man  jmiwit.  l^'nntl"^■^.  ■-u]i|ihc-.  i  "l  anil  traiis- 
liriali"n,  iiiaiiv  "t  \'.h:rh  liail  ii  hi-  w.tImmI  ..ut  "ii  an  tiiliia'lv 
lu-w  lia-i^.  rill'  ]iriiK-iiiIf>  "i  tinani'i.'  u rrr  al^'i  hniitiUL;  iknunt- 
in  the  |ir.'hK-in.  <  hir  .'1  tlic  lir-t  mi  ilu-i.'  i-  tlic  linni  t"  any 
-chfiiK-  '.l'  ta\ati'in  ihat  ran  he  iinji'-i-'l  at  '  nc  and  tlif  -anir  limf, 
anil  the  inrilKT  tact  that  tht  -tatc  i.-an  n.  t  crratc  wcahh,  it  can 
(■nls  i.r-a.ni/r  it.  I'hi.-  niHa'--it\'  "I  inaintainin^  imlii-try  and 
rini)lM\ni-,'nt  niadi-  tha-  ail.i,t;i'  ah..nt  ihi'  l:'^i^-i-  that  laid  tlu'  l,"  Idcn 
t'l^i.;  aiiphrahk'  t'.  die  pnihk-in  at  liand  and  held  hack  the  i  han- 
(■flhif  I'ri'ni  lu-u  taxe-^  and  e\ce--ivr  increa-e-  "I  "Id  ■  iiie-  Ik'- 
-nmniL:  v.  ith  inidrrate  imrea-c>  "\cr  the  peace  liMdL;et  "i 
I'.i!  1-1."..  which  niclnded  the  in^iM  extensive  >y-tein  >  l  taxation 
e\ir  tle\i-ed  in  the  Kin^di'in.  tin-  -ucce^^ive  !  iid,L;t1-  ha\c  ma- 
terially incre.i-ed  the  iMte-  nf  taxation  I'-r  u.ir  piiri).  i-e-.  ."^peak- 
ini;  -Miiu'what  hr-adl^  the  tax  plan-  may  he  -i'  iil'ed  int.  ^  the  two 
!ar''e  cla--e-  'it  excise  and  cu-ti'iii-  and  the  n^    nie  tax. 


1.1.1  k  .\N1)    1  i:.\    1  AM  s 

riure  1-  alwavs  an  inherent  ditViciilty  m  the  iini).  i-it;.  iii  nt 
indirect  laxe-  which  can  ne\a-r  \  <.  e-ciped.  .\nd  tin-  ditlicultv, 
-nnim.iri/ed  in  their  ine(|ualit\.  make-  them  ift  alt. 'i^etlier  de-ir- 
ahle  taxe-.  I'eer  an.l  tea,  h..we\er,  have  heen  attr.iciive  ..hject-^ 
III'  laxati.m  anil  'u.pienils  re-..ned  t..  h\  l,iii;li-h  Imanciers 
tor  revenue.  -\l  the  .  pi'iiin^  ..f  the  war  heer  w.i-  jiavim.;  a  tax 
111  7-.  '■'.!.  per  h.iiaal  and  lea  "mI.  per  jii.tind.  d'he  pr..p..->ak  i>t 
tile  tir-t  hiid^et  rai-ed  the  leer  tax  t..  -'"i-.  and  the  tiM  lax  1..  -^d. 
It  heer  iiad  heen  charL:e  1  in  the  ha-i-  nt  -pint-,  th.e  tax  w.'iild 
have  heen  tJ  T-.  lt>d.  per  harrel  a-  a^aiiKt  T-.  '.'d.  a-  heer,  1  he 
1  a-i-  1  the  -l.imlard  vva-  '<'>  per  cent  >^rade  allnwini;  '.'  nt 
>iiiri!        I  he  I  h.iiicell.  r,  ]unve\er,  made  a  innnher  ..1  c  .nce>-i'  ii^ 


Till:  i:ni;lisii  taxation  tolicy 


71 


such  as  rcduciiiL;  tlic  tax  to  ^j<l.  to  a  liali'-pim  of  l)ccr  ami  allow - 
iiif^  lircwcrs  a  ni'inth'.--  cridit  in  the  payment  "f  the  tax. 
W'hi.-kic-  aivl  \\  ine^  were  left  where  the>  were.  The  -tnie  "f 
the  trade  was  freijuently  referred  to  in  the  discussion  and  e\i- 
dently  the  'ax  wa>  to  In.'  tempered  for  the  hrewer  and  the  retailer. 
A.s  so<in  as  the  tax  was  determined  the  brewers  rai-ed  the  price 
of  lieer  appri>xim.itel\  t\  to  t!ie  harrel  of  thirt\-six  gallon-.  <  )f 
the  11  taxes  the  hrewer  was  t.i  pa\'  iTs.  :id.  and  the  retailer  the 
lialaiice.  hut  as  the  incre.i-ed  ]irice  of  'jd,  per  half-|)int  realized 
I'ls.  \tvv  thirt\-s;\  ^allon~,  the  hrewer  had  i;~. '.'d.  per  harrel  t'l 
cover  the  e^timateii  jo-sf^  df  the  trade  due  In  decline  m  cousuni])- 
tion.'  I  he  el'fect-  nf  the  tax  \sere  ijl' "  MiiiU'  prophesied  h\  the 
hrewiiiL^  intere-t^.  hut  despite  th.e  tax  ami  the  far  reachin^f  re- 
strictions placed  I  .n  the  licenced  trade  the  hrewini;  coinpanie>  ha\e 
U'en  rea|)inL;  a  har\est  that  wa-  m  it  thou^^ht  po-~-.ihle  two  (.r  tliree 
_\ears  aijo.' 

(  ireater  \ariati"n  li.id  pre\aileil  in  le  lewwiiiL,'  >  u'  ilie  tea  tax. 
The  uniform  r.ale  of  -Js.  M.  jn-r  pound  which  had  prexailed  since 
1>-".t;  wa-  reduced  to  1 -.  '.Nl.  in  i  "•.'i-'l,  and  1-.  'id.  in  Is.'.l.  r,ii-ed 
to  N.  Ud,  in  the  (  riiuean  War  and  reduced  to  Is.  .",,1,  in  \^:<,  .and 
tinall\-  to  c.d,  in  l^'l''  where  it  remained  until  i"^^'-'  v.hen  the  tax 
was  ri-duced  to  Id.  The  ilo^r  War  iiroUL,!"  ii  ii]i  aijain  to  tid. 
aiv!  since  tlr'  me  i*  had  heen  lowered  to  ."m1.  where  it  sto.,d  at 
the  ojieiiin;^'  of  the  w.ar,  I  he  way  l)udL;et  added  -mI.  in  I'.'l  I  and 
"d.  more  in  the  hudi^et  of  \'.i\:,.  (  )ther  cu-tom  and  excise  diitie- 
were  laid  on  ~u;;ar,  toh.icco,  cottee,  cocoa,  motor  sjnrits  and 
patent  meilicines  hy  the  Initluet  of  l'.tl.">.  1  he  dut\  on  su^^^ar  was 
increa-ed  from  N.  l"d.  per  Imndredweij.;!!!  to  '.u.  Id.  p^r  hun- 
(IredweiLjIit  with  a  re^iiltani  rai--e  of  price  tu  the  cust'  nier  of  only 
.■'s.  per  !!undredwei;;hl  ow  iui;  to  the  rediiciion  ,,f  price  to  ret'iners 
h\  tin-  r.  i\al  c  411111  i^ii  n  >  lU  -u.^ar  -'.ipi>lies  win  -e  carK  >  i])er.iiioi!-. 
had  L;i\i'n  them  coii-ideraMe  supphes  <<\  ~u.i;ar.  The  l:ix  on  tea, 
toh.acco.  cocoa,  C'  tfee  ami  chicory  w.'i-  mcrea-ed  and  ;m  ad<li- 
tioii  III    .".o  |HT  cent   exp-ected  over  ])re\iou-  return-    from  such 


I  lu-   Tim.-s.  \i.o  tiilHT  ill.   I'M) 

.ViTv    i'.'ri    I  line i   .  ),;)i,i/;.w.    \iit4ii>t  -' .   I'-'IT. 


~-2  Tin;    1  I.VANCIAL    HISTCiKV    OK    GUKA T    HKITAIN 

t.iM'-.  Tlic  'lutv  nil  tnntnr  spirit^  wa^  -'id.  ])ct  ^allnn,  tlie  patent 
iiK-ilicinc  lax  iImuIiK'iI  .iinl  the  duty  on  inotnr  car-,  clitck>,  liliiis, 
ftc,  inadf  :'.:!';■,  j)iT  cent  ad  xalnrcni.  1  he  princiital  emphasis  <it 
thi.  huil^el  --M  tar  as  taxation  was  concerned  wa^  upon  the  in- 
c-nu-  and  exrc>-  i)rotii-.  lax,  tliou^di  the  ad  valorem  tax  -tarted 
the  ^nioIdiTini;  tires  o;  controversy  over  tree  trade  and  protection. 
I  he  government,  however.  ]irote>ted  a,i.;ani'~t  any  purpose  to  raise 
the  (|ue--tion  since-  it  liad  hetn  ])roposed  not  on  tiscal,  l)Ut  economic, 
grounds.'  Tlie  new  tax  jiroposals  were  regarded  as  inade(iuate 
in  in.uiv  qu.arter-,  for.  says  Thr  lii-tinDniist,  "'What  a  ]iros- 
pcct    lh.it    ue    -hiuild   have   trebled   our   deht^   and   douhled   our 

taxe-."  ■ 

1  hi-  indirect  taxe-  of  the  next  hud^'et  were  more  far  reaching 
and  niateri.ilK  added  to  the  rather  nie.ai^er  li-l  of  the  previous 
l)ud.i,'et.  The  (chancellor  did  not  a-k  for  an  increa-e  in  the  tax 
on  te.i  and  tobacco  dver  that  in  the  I'inaiice  I'-iIl  of  Septeiiil>er, 
r.M.".,  mr  uere  fre-h  .altenijits  made  to  pre\ent  consumption  of 
luxuries  !iv  tax.atiou.  The  license  dut\  on  motor  cars  winch  pro- 
li.iscd  .a  m.iterial  niise  of  one  hundred  per  cent  in  the  dut\  on 
imiiiTted  cars  uf  I  -s  than  sixteen  horse  power  .iiul  trthled  the 
rate  on  hij^her  powered  cars  was  not  accepted  by  I'arlia.neiit.  but 
a  i.ix  i)laced  oii  ^'.isoline  in  lieu  of  it.  The  tax  on  cocoa  and 
c.  rfi'c  w.is  raised  to  (iiV.  .afterwards  reduced  to  I'-il..  and  the 
sui:ar  tax  was  increased  by  ':;d.;  matches  and  mineral  uaters 
were  adiled  to  the  list  1  wo  new  t.axes  appear  in  the  bst.  1  hese 
are  the  .iinuseinent  and  r.iilr.  iad  ticket  t.ax.  A  tot.al  revenue  of 
i.'.",,niio.oiiii  \\,iv  expected  from  the  ainusenu'iit  tax  which  \aru-d 
fr.iiii  '::d.  on  twojienin  'ickets  to  one  shillini:;  on  the  Il's.  lij. 
tickets,  kailw.iy  tickets  were  sl;ited  f.  t  ,i  tax  of  one  (lennv  for 
journexs  Ciistmi;  ''d.  to  one  -hilhnu  .ami  .an  .additional  pennv  lor 
ever\  slnllin.;  ,  r  fraction  •  r  iart  of  ;i  sliillintr.  a  proposal  which 
the  I  b  use  f.iiled  to  .iccept.  The  budget  of  the  fo.liowint:;  >ear. 
M.i\.  I'alT.  coiuiniieil  the  taxes  in  force  without  much  modifica- 
tion under  the  i;eneral  plea  of  co-t  "f  collection  and  the  tleplction 

'  7/:.   Times,  September  .ti',  l!>l'' 

'  Lc'iiion  EconomUl.  Sipti inln r  -'■■',  I'M.'. 


TMF.    r.N'CLISIl    TAXATION     POLICY 


r:^ 


of  tlie  t.'ix  Cdl'.cctinj^  staff.     The  CNCcpti'Uis  to  tlic  statement  arc 
the  ainn-enient  tax  which  ua.-  rai-ed  and  the  increase  on  tuNacco. 


Tin:  In  CO  MI.  Tax 

The  income  tax  lias  \r.\^^^  hoen  cnnsidere'l  the  curnerstone  i.f 
I'".n,L;li>li  linance.  Hnnni;  ( iladstnne'^  time  it  \va>  referred  to  as 
the  >!ieet  anclior  of  wartime  finance  to  In-  -up])iemented  hv  >evere 
duties  on  coiisumetl  hixiiri' ■  such  a.-  l)eer.  -^jjirits,  tnliacci'.  and 
tea.' 

The  tax  was  intniduced  tiy  I'itt  in  IT'.'"'  a-  a  war  tax  an  !  the 
suppo-itidii  was  lor  th'ty  sear>  tliat  it  was  .a  uar  tax.  I'lie  year 
after  it  wa^  introchiced  the  tax  was  repealed  ami  a  strai<:;ht  10 
per  cut  tax  imposed  upon  incomes  of  more  than  £tlt>  with  pn-^-iMe 
allalenlent'^  up  to  £joo.  Idle  jiractice  nf  char.^in,!.,'  at  the  >ource 
came  in  the  }ear  l^o:;  ami  the  wh^le  tax  was  repealed  in  l^Iii 
and  wa>  not  revived  ;'■  t  ,i,'eiieral  revi-mie  purposes  iiniii  I'^li.'. 
Thi-^  act  i>  the  hasis  i<{  the  present  l.i-.  In  \^'i.',  the  act  was 
repealed  and  reenacted  in  nmre  detail  and  ccntainecl  the  pre-eiit 
schetlules.  and  ^'  neral  pi^  i\  isions  rei,'ulatin^'  the  tax.  Since  then 
nunierous  amendin-  acts  have  been  passed  alterm<;  the  details 
relating  tn  assessment  and  ahatement.  The  F'inancc  .\ct  -if  I'.iOT 
granted  reliel  to  thi'<e  assessed  nn  e.!rne<l  incomes,  the  finance 
.\ct  .if  I'.nn  introtli'.ced  the  -upertax  idea  and  the  I  inance  .\ct 
of  I'.UI  permitted  separate  assfssment  <>\  the  income  >i  liusliand 
and  wife.  .\  new  hill,  propcwed  In  the  [,ord  (.li.incellor.  ha'-  heen 
introduced  in  l<otli  hon-e<  of  I'arlianu-nt  consolidating  the  ])re>^ent 
statutes  and  providing  for  an  adequate  statement  of  existitm  law. 
something  wT.icli  Iut.  heen  found  necessary  under  war  conditions.' 
It  deals  witii  fifty  st.imtes  .md  contains  -J-'.i''  clauses  arranged  iti 
nine  parts,  ;is  follows:  I.  Change  of  Income  Tax,  II  Supertax, 
ill,  i-.xeniptions.  I\'.  AdmitiiMr.atio!,,  \'.  As-i'^Nineiit.  \  I.  Av- 
peals.   \TI.  (."ollections.   \lli.   jrel.unl,   i.\.   .Miscellaneou-. ' 

111  thi>  war  the  treml  of  L^.ivernnient  toward  the  taxation  of 

'  .MorU'V  :  Ai/,-  of  dad^tioi,-.  veil,  i.  pp,  ')17.dl!S. 

'  Sialicitnrs  Joiiriia!  ai;d  ll't-rk-ly  R,forlj    .March  1«V  101** 

*  Inconu-  Tax  I'.ill,  TI<iii<,-  ,,t  I.'ordv    \':ei;'t  ■'<,   I'U:   i  •<  i  ,.  ,  tlt  \' 


74 


Till.    FINANCIAL    HISTDKY    OK    GKICAT    ISIUTAIN 


inc. line  li.i.>  ^r^'uii  ni'Tc  pr. nmunccd  a^  the  war  ha.-  j^'oiic  on.  In 
the  la,-l  pc-acc  iiU(lj;L-l,  the  .ncoinc  la.\  varied  imm  'h\.  to  Is.  >d. 
m  llie  pound. 

hi  thi-  liiidj^ct  '■]■  .\Ia\  t.  r.'l  1.  which  received  it-  linal  nmiH- 
ticatioii-  <'ii  lime  -'■''.  Httle  nmre  than  a  nioiilh  bel'^re  it  ua-. 
knocked  i-  piece-  h\  llie  nulhreak  ui  the  war.  tlie  iianinal 
raie>  "i  incMiue  ta.x  l^r  third  cla--  i.icome-  (  \\h..ll\  earned  i. 

■••d.  in  the  pound  up  1. 1  il. a  year,  lo'.^.l.  hetweeii  tl. » 

and  tl,.">oo,  N.  hetweeii  ii. ■"•'•"  and  ti'.ono,  l -.  -.k  hetueeii 
£j,iMio  and  £_',"'i»".  1-.  J'i-  U-tween  iL'..'aio  and  i.':;.<>iMi,  .\t 
t:!,oii(»  a  vear  -upertax  c^nio  intM  ])Li\.  and  ironi  tin-  level 
upward-  a  -ecniid  a-ceiidinji  scale  ua-  appilied.  ii  the  in- 
come uere  cxactlv  £:i,'»i>'»  the  .  wiier  had  t^  pa\  an  e\tra 
:d.  in  the  pound  on  £.-,0.1  ,  f  it,  it  it  were  hetweeii  £:;.n(Ml 
and  It.oiMi,  he  had  !■■  pav  7d.  extra  on  all  over  £:;.ooo.  If 
It  were  l\!ween  £l.<:<»0  and  i.''.'"*",  he  had  to  jiav  an  extra 
'.id.  oil  all  over  £l. •••)().  If  it  were  hetween  £.'.ooo  and 
£i;,ntio.  lu'  hail  to  pav  1-.  Id.  extra  on  all  ovei  £.'i.oon.  [f 
it  uere  hetx^een  £c,.iumi  and  tT.ntin.  all  over  t'l.ooo  l,ad  to 
pa\  1-.  :;d.  extra.  i'Voiu  £7.<i"'t>  a  vear  upward  the  -niHTtax 
\\a-  to  he  1-.  Id  in  the  pound.  Thi-  exacth.  douliK-d  the 
ordinarv  tax  on  unearned  incoir.e  \\lii:h  had  heeii  -  ri^inalh' 
tixed  in  Ma\-  at  1-.  4d.  in  the  pound,  hut  ua-  reduced  in 
tune  t..  1-.  :;d.' 

It  wa-  thi-  jHMCe  hudtret  that  ua-  taken  a-  the  ha-is  of  the 
first  u.ir  huduet  in  Xovenil-er,  I'-'M.  The  rate-  -t  uicouie  tax 
were  ,uraded  up  .and  troin  ihe-e  were  exjiected  £:>.7.M'. '•'•'•  in 
increase-  from  the  income  tax  am".  £1;, 0110,000  ui  -upertax  addi- 
tion-. <  hi  all  e.arned  inc' iUie-  the  r.ate  wa-  m.ade  in  the  .\'-\emher 
hud.iiet  l--^d..  oil  partK  earned  mcoine-  _'-.  Id,.  ,uid  --.  Id,  on 
unearned  incomes  of  £:J""  .\-  thi-  rate  did  not  ■Ay\A\  '^n  the 
earlv  period  of  the  ti-c.il  \e.ir  it  made  tiie  rate  1-.  'ul.  ou  earned 
income-  o,f  £-Joo  froju  I 'cceirTer  to  .\pril.  I'.'l.".,  'I'lie  rate  ou 
i:;,ooo  lucoiue  when  the  -upertax  hei::in  .amounted  to  l.'is.  uiidc 
the  pe.ice  l'udL;et  and  i.'ii<,  on  the  new  war  hud.^et,  d'he  -.u])er- 
t.ix  wa-  ."■-,  \'-'n\    .additional  -o  tii.U  the  recipiem  r^i  a  i.'i.ooo  in- 

'  Lawson :  British  H  iir  /•i/i.iiu-r.  [)    -'•'•i. 


Tii::  KN(,i,isii   TAXAridN   roi.icv 


7,5 


CMiiu-  paiil  £_'tl4  incMnu-  and  -upiTtax,  Fdr  incomes  of  £l(in,ooo 
a  year  the  cnnihineil  rate  ainuunted  to  lUs.  Id,  or  a  payment 
under  the  -ra(hitinn>  of  tli;.>:iii  llv  M.  When  the  next  hud^et 
was  arran.i,'ed  in  SepteiiiU'r.  ini.'.,  the  exi.-tint;  income  tax  rates 
.ere  rai-ed  l'>  per  cent.  However.  a>  this  rate  did  not  i^n  into 
elteci  until  tlie  pa-^saije  of  the  tinanci  hili  the  actual  result  so  far 
a->  tax  payers  were  coucerneil  wa^  hut  half  of  this  or  I'O  per  cent. 


mcome  paid  the 


I'nder  the  old  tax  (  Deceniher.  I'.M  1  )  unearned 
niininiuin  tax  of  :;-,  .;d.  m  the  jiound  and  :;-.  r,d.  ,  ,n  the  net  t.ix 
x'.hicli  ''lade  os.  for  tlie  \far.  Un  earned  income  the  miniimini 
1  tax  was  U.  t;d.  i„  t'u  p.,und  and  l'-.  Id.  in  the  pound  for 
the  new  tax  ihe  former  exemption  of  tliic  \va>  reduced  to 
tl.".i'  which  |)racticall\  m.ide  a  waL'e  tax  for  those  who  had  in- 
come.- of  more  than  £_'  I'U.  a  v.eck.  Thf  hi^he>t  abatement  that 
c-'uld  I  •  claimed  wa-  li\r  i  ;it  t'li't'  in  any  ca-.e.  Income-  ,.i  ,,ver 
i-.iHio  ..  rmerly  charL;eahle  at  _>.  "'d.  in  the  jxiund  for  supertax 
were  required  to  j)ay  js.  lii,!.  ;,nd  f.T  the  -urplu-  nver  £ln,iHHi 
a  -uiiertax  of  ;;-.  i;d.  The  s^eiieral  -cheme  of  tlic  tax  i>  indicated 
in  the  tahle  helow  ;is  shov  ;i  in  ihc  tax  on  wiiilh  earned  iiic.imes. 


TAX  ()\  WIIMI.LS-  F.AKM.l)  IXCOMI- 


IncdiiK' 

i.Ti 
ir.n 

toi 
.-.01 
t;oi 
■ill 

l.lMtO 


oia  K 

ate 

Rate 

fur 

S<-. 

ir   l'.'M-l.'> 

I'ull  .N 

tu 

K.ite 

•:    ^ 

.i 

£ 

V 

d 

£ 

•i 

n     II 

II 

0 

I'.t 

HI*. 

1 

11 

n     {1 

II 

.) 

11 

S 

4 

4 

H       1 

1) 

;i 

1.-! 

.■)!., 

4 

.-> 

:!     n 

II 

" 

:t 

4   ■ 

H 

H 

In    III 

0 

Irt 

2 

l> 

Is 

1.-. 

0 

I-    ll 

tt 

■2i\ 

\'> 

•'Mr 

:)l 

1 

:!'»   Hi 

0 
(i 

:l.". 
47 

11 

4V, 

41 

.')  ."t 

:) 

VJ    11 

li 

fc' 

1.-. 

111.3 

7:) 

1) 

5 

7 ."'     0 

II 

><!1 

11 

w 

im 

4 

its 

'nil 

etfeci 

a- 

■  I 

I  .  I    '.       K    ^    V 

the  'iw 

iR-r  •  'I 

a  £i.iinii  iiic-me  would  l)e  called  upon  to  pay  £104  ."Js.  4d.  as  his 
contribution  to  w.ir  expenditures. 

The  (  liancello.r.   however,   when  he  presented   hi-   budget   in 
.\pri!,    ItilO,   a^iain   proposed   modifications   in    the    income    tax 


'  The  Times   September  '-•'    !'M' 


7« 


llli:    IINANIIAI.    HI^T'IUY    dl     t-.KKAI     IU<H\IN 


Nvliich  provi.lnl  tor  ;i  l^ucr  rate  t.  .r  1-ucr  ani.-unl,^  ■  l  incnnic<. 
but  incroiMHi  tiic  niaMimiiu  lali'  ..|  the  tax  t^^  .-.  ,,ii  tnc-im- 
tAcccilm-  t-',''i"'.  I'Ih'  .li-tim-tioii  between  iiiuarne.l  ami  eariuMl 
inc-ine  uas  cuiitiiuicl  aii.l  tbe  late  iiuTease.l.  -. ,  that  nii  nic.niie. 

ir,t  cNcmliiiK  t-i""  "  -^^^'^  •■^•'  '">^  ''""  '"^■'""^•~  "'  ^"^"'^^  '-'  '■'''''■" 
acter  "wv  t-'.i><in  it  fm-v  ifiu  an  a.lditi.  .nal  '"1.  t..  •"•-.  Ke-' >rtinL; 
a^ain  t^  a  table  the  rate>  appear  m  the  tMlcwm^  l^-nn  : 


Fan 


Inc 

.1 
'.  f 
1  :i 
1  li 

line 

L 

lean 

cil   InrimK' 

*  a 

3  0 

3  « 

4  0 

i  n 

4  tl 

1  ■* 
4    1 

4  t! 
fi  0 

')    u 

5  0 

hiC'iiu 

rn.U-r  .iti'i 
:t(iii-.'iiiii 

.'illK.I.IIIMI 
1  IMin.l.riOii 

I'.MIK    J  (Mill 
•J  IMMI--J  .'ilKI 

-'..">i"i  and   nb'ivi 


■{"he  Mtrtax  renianie.l  a>  it  \va<.  but  be^an  at  the  five  ■^liilliu-  iiniiU. 
which  niake-  it  ni-re  severe  than  the  £:;.t»ii(i  Mirta\  in-int. 

When  the  next  bn<li;et  came  np.  in  Mav,  I'.'IT.  the  (  hancell"r 
dill  n..t  pre-eir  an\  ehan-e^  m  the  inc-ine  tax.  in-i-tin-  that  at 
thi>  >taL;e  <<\  tl:i-  way  a  -tatimiarx  nu".  itne  tax  \va-  a  -i^n  •:!  na- 
ttcnal  -treiiLZth.  In  e. 'n-e(|iienee  the  rate-  ami  ,L;eiieral  pr.  ivimmu 
reinameil  a-  presented  in  the  pre\  inu-  binl.uet. 

A-  ua-  til  be  expeetetl.  xariuM-  sclunie-  were  ilevel-peil  tn 
eva.le  the  tax.  Lite  Mi-urance,  .  .ri.i,'inall\  the  pi  -r  man'-  niethdd 
ni  pr.iiietinir  hi-  fainil\  t>i  mi  <le-titutii'n.  becatni'  the  nch  mail  s 
device  I  -aveln-  p. 'cket  l"'i'k  ir.  mi  tax„ti.m.  i'lie  lil'e  m-nrance 
cimipa,.:e-  be^an  to  ^\<>  an  increa-im;  busino-  in  -hurt  tertu  eii- 
d.  lunieiit  pi'licie-.  I'lie  i^.'Vernnient  met  thi-  .-ituati-n  b\  makinsj; 
the  exeinptii  n  deiiend  nii-n  the  -i:-'  "f  the  nicnme  and  iii't  the 
term-  nf  the  pnhc\.  On  tlu'  i.ther  hand,  -  ine  tax  paver-  limnd 
lliem-elve-  c.d.ied  iip-n  n  pa\  \\\"  nic  ttie  laxe-.  1  hi-  \va- 
speciall)  true'  i.i  Aii-iralian-  li'in.i;  ni  iaii^iaiid.  It  ua-  evident 
that  i-.ngland  mii-t  maintain  her  twcal  independcnc.-.  -nice  it  -he 
chose  til  L;ive  iiji  her  claim  tn  -neh  incume  liecan-e  \ii-tralia 
levied   a   tax    -he  nr-ht    ki-e   it   all,       I'ln-   -ituatum   was  met    by 


riu-  luiu-s.  Ma\  :(,  I'.'li 


THI^    r.N<;LISII    TAXAIIdN     I'liMi  v  77 

tho  uJM'  ciiiiiprMniin'  df  ;ill(  uiiil;  a  rohato  on  wliaf  hml  Ivcn  p.'itl 
iti  Aiistrnlia.  !.ut  nnl\  t"  the  v\lvn\  •■i  !-.  •"!.  in  t!u'  pcniv!.'  'I'Ik 
liunk-ii  i>f  till.'  war  itici'iiu'  ta\  wa--  rcllfCii.Ml  in  tlio  clcniatiil  fur 
url)an  ])r.r|)tT!\.  il.iUM.'>  nndtr  £.".n  r<.Mit  -nl,l  well,  hut  the  war 
tax,  u-itli  a  hji^li  hank  rate  and  tho  j^'Dvcrnimnt  lurrnw  m^;-  dc- 
prt'Svcd  the-  (icinand  fnr  ^ih  fd.m.'  ptMpcrtv  e^pvcially  in  the  iii- 
>tanct.'  i)f  <,'r<iund  rent-,  Imi  aL^riculturai  land-  inauitaini'd  their 
|)rfviiiii>  tirinni-->  tcndnii;  t"  iirins;  aliout  the  hrcakini;  up  "t 
estates." 


Tin;  I'lxi  Kss  i 


'i.< 


FMFIT^ 


AX 


An  additional  te.iture  "t  tlie  uiCdnie  tax  remain-  t')  he  dis- 
cu.-<ed  in  the  iovm  nf  tlie  exoe--^  prnt'it-  tax 

In  clause  ;i.'.  nf  the  Inidi^et  •'i  XnvemlHi ,  iMi:.,  a  war  profits 
tax  of  .">n  per  cent  i"  >et  n])  and  made  ap|)licahle  to  iiic"me-  tor 
the  i)erio(l  from  \u.i,M',st  1.  r.Mt.  to  July  1.  I'.M."..  <<n  an\  excess 
of  £l'(MI  (i\er  the  defined  prewar  -tandard  of  prMih-.  Tlie  deter- 
mination of  this  -.tanilard  wa-  a  matter  of  -enou>  inijiort.  I"he 
'I'rea-iiry  had  no  de-irt-  td  injure  liu-ine--.  yet  at  the  -anie  time 
it  wa-  in-istent  u])on  revenue  from  tlie  return-  coming;  to  husi- 
ne'^s  concern-  from  tlie  war  condition-.  It  ua-  |)ointed  out  that 
priitit-  were  not  t.i  he  calcnlated  l)y  income  tax  niie-.  Imt  deduc- 
tions were  allox.ed  for  intere-t,  rent,  royaltie-  on  other  pa\nients 
cxclnded  under  income  tax  accounts,  hecaii-e  alreadv  collected  at 
the  source.  The  l)a-i>  for  prut'its  wa-  determined  liv  the  axera^e 
of  any  tw)  of  the  three  j)rew.ir  years.  If  the-e  \e.ir-  v\ere 
shown  to  he  one-  of  depre  -ii  ^n  the  concern  wa-  permitted  t>  i  take 
any  four  ^f  the  la.-t  six  years.  I'.ven  this  provisiiii  wa-  guarded 
hy  conlinini;  ;i  ilepre— ion  to  return-  of  at  least  _.">  per  cent  less 
than  tho-e  ^f  the  l;i-t  three  year,-.  The  law  did  not  make  any 
di-tinction-  hetween  ]irotit-  earned  from  hii^dier  price-  .md  tliosc 
.U.'imed  hy  increased  outimt,  hut  it  did  endeavor  to  define  r.ather 
c.irefully  the  me.iniu!,'-  .>f  capital  upon  which  dividend  rates  and 
e,irninq:s  were  calculated. 


!  .nulo'l  Fiiii:,iinisl.  f>cci.nibcr  .iO,  HU(i. 
."•.(/..  jai.ii.-iry  f,.  liUT. 


78  1111,    1  INA.NCIAl.    I1I>|1IKY    ni-    CKKAT    UIUIAIV 

Iii^i  far  a^  tlic  capital  \\a>  nut  m'lm-y.  it  cniilil  cnn>i>t  nf  tlie 
nrict.'  at  wlr.cli  the  a---i't^  «i.tc  jjtircha^ed  >uliioct  to  dcdiuti' .ii^ 
Icir  wear  and  tear  a;id  U'lnjia^nient  ol  nmnex.      In  the  matter  nt 
j^ood  \m11  the  value  ot  the  a'.>et  emild  l)e  cuinted  at  the  tune  ae- 
(juired,  l)iit  no  allnwance  cunld  he  made  it  the  value  -if  -.mkI  wdl 
ua-^  the  iia^i--  of  -hare  cainial.       i'he  value  of  other  asset>  >uhjeet 
to  wear  and  tear  \\a>  ineiuded  and  capital  that  arose   iroin  ilie 
trade  or  llU^lne^>.  Miiiject  to  deduction-,  of  dei>ts  whicli  liave  heeii 
allowed  for  income  ta\  purpose--,  was  also  included.       I  he  datum 
hue  lor  return--  w.i-  tixed  at  the  previou-  avera).;e  and  in  no  .-a^e 
was  i)laced  at  !e-;>  than  '■  per  cent.     There  wa-  i^eneral  accei)tance 
of  the  liurdeii  thoui;h  the  tax  developed  a  ^'ood  maiiv  defects  both 
m  adnnnistration  an<l  i)ractice.      in  the  following  year  the  •M'  per 
cent  tax  w.is  raised  to  i;n  per  cent.'      .\  new  t .  pi  of  tda-siticaii'-n 
ua-   p.iade   under  the   head  of   controlled    lirm-   which   i)ermitted 
them    to    retain    -'i'    per   cent    a!>o\e    tlie    previ.iu--    -t.mdard.    the 
reinainiii.L;   portion   i^'ouii,'  to   the   -tate.       (  >nce  iiktc   the  exce.-s 
lirotits  tax  wa-  rai-ed.  ihi-  time  to  sn  y^^r  cent 
munition-  lev\  after  Jaiii!ir\    1.  I'-'lT 
with  ihe  proiit-  tax  and  all  l.usine--  concern-;  .-uhject  to  u  even 
thou.i^di  iioi  touched  Iw  the  war.      in  defendiiiL;  tin-  chan.s^e  in  the 
application  of  i!u-  tax  the  ihancellor  stated  thai  iic  knew  tlu  ditti- 
ciiltie-   falling;  on  Concerns  1)\    reas.^n  of  the   widening;  scopr  of 
•.he  tax,  hui    that  lie  knew   of  no  otlu-r  form  of  taxation  which 
on  the  whole   w..iild  lie   f.iirer  and.   less  detrimental   to  national 
mti're-;-.       Idle   v.ilue  of   tlii-   t.ix   i-    well   -hown   l'\    the   returns 
for  the   ve.n    cI-m,-     \pril    1.    I'.'l"^.   which  amounted   to   £:.'.''i.- 
jll.iHMi  ,r  :'.ii  jier  cent   "i  the  tax   le.einie   f' ^r  the  vear.       1  he 
income   i,ix    liroui^!:!    t j:;'.i..'i<i'.i.:'iii»    in   !■■   tlie    Treasury    for   the 
same  period  or  :;:'  j.er  cent,       I  he  two  taxe-  jiroiluce  7.",  per  cent 
of  iIh-  tot.il  t,ix  re\emie.     In  yencr.d.  the  e.timates  ,,i  tax  returns 
ha\--  heui  helow    the  ,ictii.il   receijits.       Idle    following  table   md.- 
cite-  llie  le-ullv 


i.\   this  act  the 
was  .'Uioii-hed  ;ind  merged 


'  TA.-  Tinu-s.  April  i.  I'»1C, 


M.iv 


l-'l^ 


THK    ENGLISH     FAXATldN     TdLICY 


79 


li'M-i:. 

I'.'lti  17 
I'llT-ls 


Exci"=s  of   Kfvi'iiiu- 
<  Hit  Hu'Il;!  t   I'^tiniatt^ 

>;       17.|•>>>.ll>^(t 

:!i.:i;r..-<j4 
7l.l">:i,.'>S2 
tls  (i,t4..)i>5 


I'M-e'v  Tax   Krvri 

.£   iri,."ij'i.iMi(i 

l.t'ttU.IMIO 
."i(i;.lsll  (MM) 

4:i':Mip'(MiO 


£  IS'.l^tHJ,!!.-,! 


t:  1 -"•,;!  I  :l.ii<iO 


CHAPTER  VIII 

Inflation  and  Other  War  Costs 

A~  tin-  ni'.iiM^raiili  i-  Imiiti.-'!  t..  a  'Iih-u-i"!!  ■  f  tiiiancial 
iii;ittiT-  i--.'.i-i.!tr<l  \Ml!i  iIk-  war.  tlu'  niai!\  hur.li'ii-.  .i;rii':-  and 
siiiliTini^  that  caiiu'  fr-in  n-  pr. -ccnti.  ai  oan  n-t  I-f  c  in>al<.Tt.-(l 
and  Muli  l.nrdi-n>  a-  ina>  Kv  lir-n-ht  t-  tlu'  attention  mI  i\w  reader 
are  Imnleil  t..  the  incne\  -ide  e\en  .-I  the  tuiint  ■  n-  -ne-  that 
nii};lit  lie  cla~>ed  .1-  ee-'iii'-nne. 

'lA  I'l.  in    '  N  II  v  1 1""^' 

Mni'  -t  I'r-ni  the  l.eLiinnin-  "l  the  e.  ntliel  |inl-lui-t-  have  ealled 
attenli-n  i"  the  jiiMer--  ..f  nul.Ui-n  ,U"nii,'  ■ 'ii  and  llu  e\d-  a--" 
fi.ited  v\  ith  i!  In  \tneriea  nnlatinii  ha-  heeii  ih.ai.uht  •  1  a-  a 
matter  aim.  i  \\h..II\  eionieeted  with  the  i--ne  ■  i  \'A\ny  m  \k-\ 
in  time  'I  vn-i-.  '  »nr  e\|>ei  lenee  with  the  i^reeiihaek-  in  the 
I  ivii  War.  !.i  -av  n^  thin-  ■  1  the  rieli  Miir\  -I  m.aietar\  e\|ieri- 
ciice  in  the  I'tevi  Intii  m  and  the  e\|ierimeir  ^  n  ilh  -tate  haiik- 
aiid  Mher  certitieate-.  ha\e  hnnted  the  idea  -l"  inilatiiiii  iirett'\- 
niiicli  t"  the  i>ne  I  a"  tiat  and  -emi-liat  ni'  !ie\  1  he  din-n-Mfii  m 
(ireat  i'.Miain.  if  \\i\ir.  ceiiiir-  ar.  iind  an-ther  ]iha-e  i.i  war 
Imanee.  W  iiile  w  1-  true  tlial  the  lrea>!ir\  ha-  -ieadii\  iiKTea-ed 
the  ian|int  i^I  ten  -hilliiiL;  and  "tie  i.-nnd  in'te-  the  |niMu-  attenii.ai 
i-  m.re  peeiliealh  ta-ieiied  nimn  the  ehani;in'4  ratin  "i  laxatnai 
and  the  l-rn.win-  ]i-lir\  i.f  ilie  nati-n.  The  ii..he\  adMpted  lia- 
a  t.-ir  reaehitiL;  elYeet  iiji. 'ii  pnee-  and  the  nhima.te  c.  iidnct  nt"  the 
\,,,i        I  i..\\  tin-  e-mes  alHUit  is  H"i  a  -iniple  ina'ter, 

I'lif  injcctii'ti  ii  lari,a'  sitms  of  paper  111.  tie)  intn  the  tinaiicial 
svsit'm  III  a  ciiuiilrv  In  a  l;i'\ eninn  i:t  intent  nprni  -eeiiriiii;  tlie 
m'ce— ary  means  df  O'lKhictm.L;  a  war  ha-  a.n  immediate  elteet 
that   ci.i^cly   tullnws  the  la\\>  •  1"   -n].pl\    am!   demand.      '  )n    the 

Ml 


IMl.\||ii\      XNKiiIin.U    \\    \H    (OSIS 


1 


.-tluT  li.iml,  tlK-  call  f.  r  v.iliimar\  lean-  ir.-tn  \\\v  s.ivin;;^  "f  the 
icuiilis  iin.Mn>  ;lic  ^liitiiiit;  ■■!'  puri  lia>inL;  p.'wcr  t'r-in  IcilKt  • 
^'iiMTiiiiicnt  .iiiil  tlu-  -limulatiiin  'if  ilfinanil  l'«ir  immiticitis  .n.l 
(."iniiiiilitii'^  ri(|i;ir(.il  I'^r  war  piirim-t.--  I  hi-  ilt-niaiid  r.ii-f^ 
llu'  jir-i..--  "1  -lull  article-  aiul  aU"  rtduci'-  the  diniaiiil  \'>r  (  thcr 
C'lntui  iliiic-  <iut-!>lv  the  li-t  'i|'  war  c  nimi' ulitifN.  Such  a  >it- 
uatH'ii  1-  l>a>-eil  "11  the  -uiiiJMMtinii  that  tin-  l^aii  in  the  j^i'vcrnniciu 
i->  iiiaile  iri'in  nati'iial  -a\uiL;-  When,  h'  \\e\er.  tlie-e  luaii-  are 
lar.L;er  than  the  -avin^-  ni  the  cnmitrx  can  -wiiii,',  .hk!  the  I'litiire 
-aviui;-  "f  the  C"imtr\  ,ire  •Irawii  up'.n  ihri'iv^h  the  n-e  'if  haiik- 
ihl:  creilit  a  -erie-  "f  h\  jiothec  ihiil;  im  iveiiient-  he':^iti  that  may 
ha\e  far  readmit;  ett'ecl-  n|)"ii  creilit-  p'^ue-  an'l  the  (li-trilniti')ii 
"f  cajiiial, 

'riii:  I'lCK  I--  111-  Inii.  \  riiiv 

ll"W  tlii-  iiitere-tiir.;  |)riice--  make-  it-e!f  felt  wa>  ile-criheil 
In  ."-ir  h'lwaril  ll"!ilen.  an  eminent  liankiii^  anth"rity,  in  a  -peech 
in  I  'arhame"t  '  He  called  at'.eiui'  in  I"  the  fa.  I  that  lietweeii  Inne, 
I'.'lt,  and  the  i  nd  "f  i'-M'i  the  i'ank  "f  l.iiLjk.nd  and  the  prin- 
cipal i'iiiit  -ti'ck  liank-  had  created  "ii  halance  an  addilinnal  hank- 
in  j,f  credit  iif  ah'iiit  £l'.i:;,iiiMi.iinn.  jla.  ^i  .vernnieiit  hai!  Keen 
respi)ii>ihle  fnr  the  creatinn  ni  crclit  h\  Imrrnw  :ii^  ii\er  £:i,ni'i',- 
0(1(1, (1(1(1  ^rii-  and  tL'.-.'.L'.'idoniMi  net.  'I'he  'le]i"-it-  "f  tlie-e 
hank-  hef'ire  the  war  did  ii^'t  aiiMnut  t-.  mure  than  £  1 ,  Imii.imk*,- 
(HKi  and  their  availahle  re^mirce-  were  £:;iMi.(itiii,(iiii).  jlankint; 
credit-  were  created  ever\'  time  ^'<  i\  ernmeiit  l.i.m-  were  taken  u]) 
hy  hank-  "ii  their  nwn  accmint-.  nr  when  the  hank-  made  ad- 
\aiice-  t'l  their  cn-tnmer-  tn  enahle  them  t'l  -nh-crihe  fur  <^n\-- 
eriimeiit  luan-.  1  he  jimce--  \\a<  peripatetic.  It  re-einhleil  a 
wh.;el.  that  re\"l\in.L^,  came  ar-uind  t'l  the  -anie  place.  Tlie  hank- 
placed  in  the  \\  heel  the  payment-  which  the\  made  t' ■  the  credit 
(if  the  <,'iivernmein  aii'l  the  -nh-criher-  received  ,L;"veriiment 
securities.  The  ^"veriiment.  in  it<  turn,  placed  in  die  wheel  the 
check-  which  it  i--ued  in  pauueiit  fur  en;-  ■  ditie-  and  --er'.  ice-. 
ai;d  the  crclitur-  w  h' i  received  the  check-  u-ed  the  wheel  i.' i  carrv 

' /'jr/Miii.iiM   V  /'.-.''j/.-j-.   Ii    *    .  Jaiiuary   .'li,   l'-'17. 


MICBOCOPY     RESOLUTION     TEST    CHART 

ANSI  n-ii' 


1.0 


I.I 


H 

if 


I  2.2 
2.0 

1.8 


.25 


1.4     i  1.6 


^        -APPLIED    IfvVlGE      Inc: 


82 


•I  in.  ii\.\N(i.\i,  iiisToRV  (ii-  (;Ki;.\r  ):kiT\r 


tliL'  elK'fk>  liack  {'•  tlic  hank  wlit-ro  iln.'_\  wtTc  placdl  t' i  their 
crcili;  i:i  the  hank-  am!  tlni-  rci\-tali!i-lu'il  the  iMiik-'  rt.-^cr\i>  ami 
them    ii<r  amalicr       .veniim-nt   I'lan.       W'iicre   the  '!e- 


ilj^crihe  I'^r  Inan^.  tlie  re\  Mluti.  .ii. 


preparei 

positdr^  u--e<l  their  (le|j">it-  t'i  >iil)>cr! 

'if  the  wiieel  -h'^ut-d  tliat  these  (le]Hisii~  \\ere  merely  tran-terrecl 

t'l  tile  LV  veninieiit  ami   after   disliur^enieiit   hy   the  f^^ '^  eriiment 

f"Ui!(i  their  way  hark  t' >  the  j>'int  ^tnck  liaiik~  lhri.iij;Ii  the  ao- 

caiiil-  III   I,',  ivernnient  ei  ntract' ir^.      'i'he  -air.e  credit  thn-  went 

ar'iiiiiil  the  wheel  .mi  Imiu  a->  its  different  i.wners  were  willing  tn 

take  .umernnieni  luan.s.  and  durint,'  each  revuhitii  n  nf  the  wheel 

an  additinnal  ani<nint  <•{  l^an  was  paid  f' ir. 


^uveniineiit   all   thnai,i;h   ha~    tirianced   the   war   t 


IJO 


it    lAVd- 


inuch  .  ai  hirriiwed  hank  niMnev  ;  i  1  i  fr'.ni  the  I'.ank 
land — the  iienjile's  ni'^ne}  twice  rein'.Ned — the  w  Tst  fiirin 
(if  hank  credit  inilati"ii;  i  J  i  f ri  iin  the  hank-  fur  iiue-tnient 
in  ihe  lii-t  and  secniid  war  luaii- — the  ])ei'|ile's  nii.iuw  i  iiice 
reniMved— a  vicimis  f^  .rin  <■{  hank  credit  inllatinn.  hecause 
liank  de|)"sits  slmuld  he  nscd  inainl\-  fur  trade  advances,  and 
shmild  iMt  lie  lucked  nji  in  k 'Undated  :;•  i\-ernnient  securities; 
(  :;  I  fr^ni  the  suhscnher-  tn  the  third  War  I. can  wlm  Imr- 
mwed  the  ninne)  tn  suliscrihe  fmin  the  hanks  the  jilcd.i^iiifj 
nf  ilie  pei.iile'-  future  sa\ 'n,L;s  tn  lind  ni'iuw  f i  .r  j^ik  em- 
inent t-siieiiditnre — an  niiwise  use  nf  the  iienple"s  ].)nwer  tn 
sa\c-.  an  inver-e  ratin  t^i  -nuiid  wartime  fma.nce.' 

It  tlnis  appi-ar-  that  inilatinii  has  taken  jdace  s,  i  that  the  cnntm- 
\ersy  in  h'ni^dand  centered  almut  the  c|uestinn  whether  it  cnuld 
ha\e  heen  lulpcd  and  whether  it  cnnid  he  at  least  reihiced  imw 
that  the  ci  untr\  has  eiiHTed  npnn  a  pn]ic\-  that  jirnilnce-  indatinn. 
d  he  iiiethnd  iinw  fi  llnwed  ap])arentl\-  increa-es  the  wealth  nf  the 
cnnntry.  ddie  tiling  that  actually  hap])en<  i-  the  enlargement  nf 
hankni!.;  depnsils,  which,  as  pnteinial  curreiicv .  tend  tn  increa-e 
jirice-. 

Inckk.x.^f.   i\    1'ku-i:.< 

Ihe  increase  nf  prices  is  a  serinii-  matter  in  time  i<\  war  l.ie- 
caiLse  nl   Us  eiiect  upnii  the  jjupuiatiuii  w  hn  prnihice  the  means 
'  D.  DritnmiiM'i  ira-ir  m  l.oudnn  liconontist.  .-\ugu5t  -1.  l''ln 


lMl.\Iln\     AM)    (iMii;i<    \v.\k    COSTS  >;; 

<'i  carryii!-  nn  the  v.ar.  Vavi-u^  rep.-rt^  of  ihv  r.ninii.M.  n  ..f 
lr,(|uiry  maintain  that  r-^c  ,.i  [,r:rr-  ha>  ha.l  inudi  t.,  ,1,,  u„h  the 
«r..uth  ..1  in.lii-trial  unrc-t.  in  -n.-  ,.i  thc^;  rep-n^  in-q.Tcl 
li>  ihi-  (  ,.ninii--i,.n  .^t  uhich  Sir  Alirol  I'.MM-h,  the  rha.rnian  ..i 
the  (iinard  ( '.  iiii[ian\ .  i^  a  incnihi-r.  it  i^  -tatcd  : 

1  Ik-  Miif  .int^tan(hiij;  caii>e  of  luire^t  which  ue  iiml  evcrv- 
\vhcre  1^  the  hi,-h  c-t  .-i   hvin-.  c-|.ecialK    \Mth  rc-ar,l  t.. 
'"'".'■      """  '"  ace  .nipaniol  hv  c  inpiaint-  ot   c.xpl/^tati  ai 
pr..iiiccrni^.  an.!  l,a,l  .li<trihiitiiin. 

I  he  initial  cau-e  nf  the  rl^e  ni  pnce^  ua-  the  tinannal 
pohcy  oi  tne  L;-vei-niiiem.  uhidi  lia<  rehed  t--  much  . -n 
loan.— lar-elv  credit  1-an  — an<l  f "  ■  little  mi  ta\ati..n  <le- 
si,i;ne(l  to  check  iiniiece.-sar\  coii^niiipti.  .n.  The  re^ilt  has 
i>een  a  .^reat  inllation  of  credit  foil,, wed  hv  a  \erv  seri,nis 
nitlation  ,,f  the  currcncv.  s, ,  !,,„„  a.  the  present  financial 
pi|Iicv  i>  c.  aitinued  price>  will  c.,ntimie  t.,  rise.  It  i.  ad- 
nntted  that  .■ncnie  ta\  and  supertax  could  r.ot  |,e  suh- 
>tantiallv  raised  in  ),'eneral.  nr  even  in,  re  >ieeplv  graded, 
without  a  comitreheiisive  ref,.rni  with  regard  t,.  tli,-  treat- 
ment ,,t  familv  mciines.  The  pr,  Tlem  will,  in  anv  case 
ha\e  to  he  taced  after  the  conclusi,,n  of  peace,  and  it  si,, mid' 
he  tackled  now  m  orrier  t..  reihice  our  .lependence  ,.n  further 
intlatioii  as  a  tnean<  cf  tinanciiii,'  the  war. 

Our  attention  wa.s  called  p.  the  cntrast  lietween  the  man 
who  ,s  c-mpelled  t,.  .serve  a-  a  s,,ldicr  and  the  m.m  wh,. 
voluntarilv  IcikN  i, ,  the  ;;,  .vernment.  It  uas  terselv  put  V> 
Us  that  the  s,,Iditr  is  c-mijellcd  t-  serve  at  one  shilhn^  a  dav, 
while  the  man  with  m.'uev  v,,Iuntarily  len<ls  t, ,  the  ^uvern- 
nient  at  :■  per  cent.  This,  it  is  pointed  -uit,  is  irritating  and 
unjust.  .\n,,ther  cause  .,f  irrit.atinn  is  the  apparent  luxurv 
and  ostentatious  displa\-  ,,f  wealth. 

It  is  evi.lent  that  after  ai-  experience  of  nearlv  three  \ears 
nnnv  pers,,ns  will  ii,,t  cnrh  their  extravagance  and  sl,,,.,y 
of  luxurw 

In  order  »,.  remove  the  seiis,^.  ..f  irritation  amoni;  w.irker< 
and  to  ass,^t  the  n.itional  exche(|uer.  all  unnecessarv  expen- 
•  liture  of  the  individual  -uffht  to  he  cliecked,  and  this  ,-„, 
o'lilx    lie  done  hv  tax;iti,>n  ,  ,r  l'\    f,  .reed  k.aiiv 

I-or   maiiv   xcars   the    /.,,;;,/,„,    /u-n,.nnist   has   maint:iin<vi    an 
Index    Xumher.      .\n   examinati,n   of   ih,.   tahic    f-  • 


Si 


Tin;    1  INANCIAl.    m^TuKV    ol     (.KKA'     IlUIIM.N" 


\i',ir-  1 '.'111 -I'."'  arc  u-cd  a-  a  lia~i~  iudicati'-  a  lajiid  and  tni])aral- 
k-!cd  cliaiiLjt/  III  ]irKa'-.  i  lir  /n'runiiiis!  ha-  cla-silied  [in. ducts 
liiidir  ilu'  licad  >'i  i-rreal>  and  UK-at-.  and  ■  liuT  i^nA  ]ir<)(hicts 
I  tia.  -ii.L^ir.  I'tc.  ).  tf\tiU'-,  niiuiTal-  and  nri-ia-llaucMU-  i  ruhbcr. 
iitnlitT,  .'il.  etc.  I.  I  he  l;a-i~  t"tal  "i  iIk-  ]>r\cu  '  i  the  i)r'Hluct- 
a u;; related  l'.l'iih.  At  the  rnd  "f  jul\.  I'-U  1.  the  iirice  \>a-  >1m\ui 
HI  _',.".i''.".  ])"int-.  \'\i  t'^  Ma\.  I'-ilT.  thi->  a^'.i;rL\^atc  had  in' to 
than  d'inl'led.  -h<A\ini;  "'.ll-'  piini-  'if  an  increa-e  "i  -'I''  per 
cent  ever  the  ha-ic  price-  •■{  I'.hiI-h.'j  and  l'^h  per  cent  ■  iver  t!ie 
prices  prevaihiiL;  ■ -n  Anj;n-t  1.  \\'\4.  1  he  -nnati"n  nia\  he  -ntn- 
inari/ed  a-   tullnw  >  ;  ' 


Group    I'tal        (ir.iuji  T.'tal  !<i-(;  since   Iiilv. 

V'-.A  M:i'..   I'll:      i:-.l   luK.  I'lM      Mil    -n  !'.r'>Vnt 


I-  creiil-  aiici  nu^it- 
<  Hiur   I'lMid  iiriMliicl- 
Trxtile- 
MiiuraU 
Miscellaiu  ini- 


l.ilTta,, 

,>;!;iir, 

'.,11  J 


Cijia., 

4i.iir, 


1  .: 

.>4 
104 

SI 
1.J2 

111 


A  further  -latenieiit  hrin^inir  the  Index  d'A\n  fi  l-'elir>iar\-  1. 
I!il^,  -li.iws  a  decline  in  cereal-  and  meat-  <•{  i"'"'  j.'ant-,  ether 
tMiid-,  -lu'h  a-  tea,  -ui;ar.  i-lc.  have  ri-en  -huhtl\  ;  textile-  m 
ilie  jieri'd  -ince  .\ia\  have  ri-en  t"'"'  jieiul-;  nniu'ral-  ha\e  de- 
clined 111  p'  int-  and  nii-cellaneeu-  item-  ri-en  1".  peint-.  d'he-e 
ciian<;e-  make  the  iiicrea-e  ef  jiricc-  IJT."^  per  cent  -mce  JuK, 
I'll  1, 

\\  itiieiit  (jne-tieii  there  ha-  hceii  an  increa-e  in  price-  and  there 
ha-  al-e  heeii  an  mcrea-i'  m  the  nienex  in  circnlatieii  and  in  the 
hank  cia'dil-  a^ailalile  !•  •!■  purcha-e  ii-e-.  i^^e-  the  lir-t  phe- 
iiemeiien  re-t  n -r  it-  can-e  iijien  ilie  -eceiid  ?  Ihi-  i-  liie  Ceii- 
irnverted  |ieint.  hAen  -"  -ea-eiied  an  autlieritx  a-  Mr.  \\  .  U. 
Law-  n  inaintam-  that  hecan-e  price-  lia\e  i^'T.e  n.p  tliere  nui-t 
h,i\e  heeii  .in  mcrea-e  in  the  -u]>'  'y  et'  nidiiev.  With  the  with- 
ilrawal  oi  men  t"  the  armie-  waqc-  rn-e,  liit  it  i-  n^t  \.i>  he 
taken   -erinii-lv  that   it   \\a-   necc.--ar\    t"  inaierialK    cnlan^c  the 


I'.iiT 


INI'I.ATIdX     AM)    (111(1  K     \\   \l<     (ii^r> 


*5 


and  materially  t.'nlarjj;al 


su[)[)ly  .if  iiiite-  and  tn  multiply  l-ankinj,'  credit-  and  eiilar.cc  the 
manufacture  <d'  check  currency  in  order  tn  -upidv  \\a<;e-. 

If  all  the  nil  iie\-  re(|uired  fur  war  iiurpM,f,  liad  hcen  taken 
liy  the  .government  either  in  ta\e  .  :r  in  lcian>  prmiuced  hv 
^eiiuine  -aviiiLT,  then  in  >■  i  far  a~  the  inircha-inj,'  p. .wcr  <>{ 
the  munitii'ii  worker-  had  lieen  mcrea-ed.  the  pure'  .-inLj 
pcuer  (if  other  cla->es  of  the  communitv  \v..uld  have  neeii 
dimini-hed,  and  the  ri-e  in  price-,  thuuirli  inevitahle  m  cer- 
tain C'  innidditie-.  wonld  n"t  have  lieen  general. 

Thi-  i-  tile  conclu-inn  ,,f  77;.'  /wi'iioDiisl.  'Idle  ^^"vcrnnient  li\- 
the  u<e  "f  paper  i--ues  and  hank  currenc\  uiiil  .ul,tcdl\  -aved  it- 
self a  }.,'.„, d  deal  of  trouhie  and  iiur-ued  the  ea-icr  paili.  hut  liy 
such  actio  1  it  -tinuilated  extra va,t,'ance  a 
tile  cost  of  ti'e  w  ar. 

1  his  is  of  cour-e  a  -erious  indictment.  ( 'ould  the  war  have 
Keen  financed  without  inilation-  lla\  hv  dav,  and  year  hv  \ear 
the  co-t  of  the  war  h;i-  mounted  to  untoM  ti-ure-.  lndu-tr\'  ha< 
heen  di-turhed  and  a  va-t  expansion  of  .ictivitie-  t.akeii  place  on 
account  of  .government  need<.  The  (li-trihiition  of  fund-  to  the-e 
indu-tries  occasioned  tlie  initial  enlargement  of  |)urclia-iii!;  power. 
Ihe  use  of  the  fund-  recei\ed  1)\-  the  head-  of  manufaciuriiiL; 
eoncern-  and  the  worker-  in  them  i<  the  -tartin-  jioim  of  the 
inilation.  If  the  fund-  are  turned  hack  into  L,'overniiient  securi- 
ties, the  re-ultant  expan-ioii  may  not  In-  -cvere.  Imt  if  the  m.iney 
is  u-ed  lor  luxury  the  L^overnment  mu-t  re-ort  to  nunv  means 
of  sccurin.^r  fund-  that  ultimately  re-ult  in  e\p;m-i(,n.  .\t  the 
present  time  the  amount  of  £1   ;iiid    1<'-.   note-  i-  not    far   from 

tl"".""".' •      T.    thi>  .^um  n„:     he  a.hled  the  increa-e  m  l.ank- 

int,'  deposits.  Tlie  important  p!ia-e  of  the  matter,  and  the  one 
th.at  ailecis  the  proli'cin  of  ::o\crnment.  i-  the  iiitluence  of  the 
ri-e  ui  prices  in  stimulatinij  n.ational  unrest  and  forciiii,'  the  .i;ov- 
ernment  to  enter  upon  an  extended  police  of  food  control. 

The  .Select  t 'omniittee  of  the  iloii-e  of  C'onimoii-  in  their 
rep-rt  i  Wdiite  i'aiier  ICoi  d, ,  n,  .t  think  tlial  the  i-ue  of  pajier 
money  ha-  had  much  et't'ect  in  the  exp;in.-ion  ..f  credit.  The  hi-li 
prices  are  due  in  th.eir  jud.ument  t  i  the  le--emii.i;  of  producti'  n. 


i!!i.    nNAXlIAL    iU.-^Tf'KY    (!F    ilHKAT    l'K!r\!N' 


'I'Ik'n'  ^'i\t.-  U\v  r(.'a~"ii-  I'^r  tliu  (lemand  '-i  the  \\i  irking  cla---c-  fur 
war  li'iuiSLv-  i-r  \\a,:;v  iiicrfa-i--.  '1  he  lir~t  '<\  ihc-c  i-  the  ost 
.if  liviiii;;  tile  -ec'ii'l,  the  hir<;e  pr't'it-  .f  the  empldyin-  clasN', 
the  thifi!.  a  -i;]>]/!\  "f  la!>.  ir  Ie>,-  tlian  the  ileniaiul;  the  fmirth, 
llie  fact  that  the  w  iker  ■ 'U;i^ht  tu  have  a  larger  \va;:e  hecan~e 
I'f  increaseil  i.ntpiit;  am!  the  fifth,  that  there  -h^aiM  he  eiiuahty 
■  if  ua<.;e-  ill  ai!  iinhi-trie~.  wliicli  ean  <nily  lie  attained  hy  rai>ing 
the  waj^e-  t' i  the  -taiidanl-.  ]irevailini;  in  ^mne  favored  indu-trie-'. 

.\cc'ir(hii};  t.:  the  li-iire-  '•i  the  I'.nard  of  Trade  f 1  price-  have 

increased  li"!  per  cent  and  takiiit;  all  iteni>  in  the  C'i>t  .if  Uving 
the  increase  i-  fully  ~^.".  per  cent.  '  lian-e-  in  dietin.t;  niij,dit  re- 
duce thi-  t.i  •".:;  per  cent,  and  dediictinj,'  the  taxe-  .  m  C'.n■^unler- 
t..  "ai  per  cent.  An  inijuirx'  int.i  the  uli..!e  tnatter  liv  .a  ci.nimi--- 
-i..!!  with  liheral  reiire-entati.in  <if  lalmr  i--,  in  the  .'piiii'.n  of 
the  (, '.aninittee,  iieces.-a.y  hefore  an)thin,u  re.al  can  t>e  d.ine  a!).)Ul 
adju>tinf,'  prices  and  wages. 

PhKKS   AM)   Si:rAKATI()\    Al.I.liW  AM  KS 

What  are  called  the  prevailing  high  prices  ..f  the  necessaries 
of  life  h.tve  c.  iii]»elled  the  gnvernnient  t.  ■.  enlarge  the  rates  .)f 
-epar.ati.  ill  ,all<  iwances  ]iayal>le  f.r  the  children  <if  sailers  and  sul- 
dier-..  I'lie-e  additions  U<  lS.  for  the  tirst  child.  Is.  tWl.  f. .r  the 
sec  nd  and  third  and  Is.  f.ir  the  fourth  and  each  succeeding  chiiil. 
'idle  amount  thus  aKulahle  for  petty  naval  ot"l"icer>  with  .-even 
child.ren  was  l'^s.  jier  week  in  a.idition  t. .  all  w.ance-  f r.  .ni  pay. 
ddie  army  all.  wance-  are  higher  hut  include  alL'tmeiits  from 
]ia\-.  The  t.ital  f .  T  th.e  j)ri\ate  with  seven  children  reached  in 
all  1"-.  and  for  m  ■iiconimi'-sioned  otticers  a  --omewhat  higher 
ligure.'  The-e  -tatenients  are  interesting  hecau-e  indicative  of 
the  change. 1  view  regarding  government  respoii-ihility  in  time  "f 
war.  In  other  d.ay-.  n- .t  ni. -re  than  lifty  _\ear-  hack,  the  -.  .Idier's 
faimh-  wa-  left  t..  >li:ft  f .  .r  itself.  Idle  larger  humanitarian 
\iew.  while  guarding  the  nati.iii'^  heritage,  nevertliele-s  makes 
war  nii're  exi)en--i\e  to  wage,      (hi   .\jiril    1.    I'M  7.   the   .Mnii-ter 


on  I'ension- 


11. ul 


7oii,(Miii  ca-es  o.n  the  hooks  .  r  in  [irospect. 


I'l     lulT. 


INi"l,\TIn\      \\l)    (ii'iir.K     \\  AH    •,'■.-!">  S7 

This  -tatciiicm  dnl  u.>t.  mclu.lc  the  chil.lrcii  ami  u  iw^  ..f  iiieii 
in  the  ticM.  Init  i.nly  tlu'  ilc|R-iul>.-in-  nf  tlic-c  uhw  wero  ihsalik''! 
'<r  killed  at  the  fr.  nit.  A-  tlu-  war  ha^  -"iie  ( 'ii  the  ministry  ha> 
fnuiid  It  nece— ary  t<  i  raiM'  the  rate.v  L'lider  the  jjlaii  in  \0',nic 
a  uidiiu  under  thirt\-tive  will  receive  l-'l-,  '.'d.  per  u  eek  and  ad- 
ditional amount-  i-r  the  children.  The  penMi.n  i)lan->  1^1  t'.ie 
h:n-,dish  ( idverninent  are  well  ci.nceived  and  liU'ral.  d  he  -cheinc 
t(.)r  direct  pen-^inn-  and  widows'  alLiuancex  udl  reijnire  U'<{  le-< 
than  a  capital  accnunt  nf  t:;',w;ji(i(i,iHMi  ,,t  which  tJ.'i.noii.iiDi) 
nui^t  he  provided  ni  ihe  tir-t  \ear.' 


Pkn.-^ki.v  ("m.sis 

The  principle  up.'ii  wliich  the  luij^dish  ("iMxernnient  proposed 
to  .uive  a  peiKiim  t. .  -.>ldier>  (not  war  allMuance-l  i>.  ha-ed  upon 
service  rendered  and  n-t  upnn  the  nnniher  ot  children  he  pn-.- 
se.s^ed.  Ihe  services  re-t  upon  n^  other  e-titiiate  than  that  of 
v.ell  d(  ne.  .\11  uere  in  receive  a  ilat  rate  petiMnn  supplemented 
h\-  an  allow ance  ha.-ed  u;)on  earnini;  capacity.  Income  was  not 
Cdiisidered.  the  l)a>is  of  the  supplemental  pension  was  the  man's 
earnin,;;  cajiacity  wh^ch  was  measured  hy  his  earninij^  duniif,'  the 
twelve  months  [)rior  to  the  war.  To  this  o^-jieral  rule  two 
excepti.iiis  were  made.  tIio.se  of  .students  and  apprentices.  In 
the  case  of  the  apprentice  the  wa.t;e~  uere  reckoned  at  the  stan- 
dard ua^'c  of  the  trade:  similarly  in  regard  to  the  student,  if 
totally  disabled,  t!ie  as-essiiient  of  hi>  disability  pension  was  at 
the  flat  rate  of  I'T.-..  r,,!.  p^.p  week  plus  :-.  per  week  for  each 
completed  year  at  the  hospital,  collei^e  or  universitv  where  he 
was  k-in^  tr;ined  for  his  occr.jiation  or  profes^ioin.  d'here  were 
allowances  in  addition  as  in  the  ca.se  of  the  man  who  required 
constant  attendance  tliat  woiild  -ive  l'hs.  more  per  week.  The 
result  .if  the  plan  would  allow  a  di.sahility  jien.sion  of  7:.s.  in  the 
most  e.vtreme  instance  and,  i'7<.  .;,!.  per  week  in  the  ca-e  of  the 
man  of  low  earning  power. 

Ik'sides  the^e  !,ur  lens  of  increased  coMs  of  livln^^  hit,di  prices. 

■ -'svcon.i    Kt-purt.   .-^ekct   C-mmittee   ■•u   .Vamna'    Fvni  ndifirr     M-,r,-i,    ];; 


iiii,    l-INANCIAI.    HI.STORY   OP   (IKI'.A  I     IlRIiAlN- 


]K'iiH"n^  ami  all  lu. hut-,  an-  many  i.tlu-r-  that  t-  11'  w  in  tlu'  tiail 
c  i'  war-  Tlu-  -ixatcM  i-  tlic  lM-^  ,<i  lite  winch  in  the  ca-f  mI 
I  irrat  I'.ritain  lia-  riMclu-il  i  larL^a-  ti'^urt.'.  th.iU^h  it  i-  Ih-Imw  that 
Ml'  till-  hriMK-li.  Thf  iimiii-  f'T  iMij-^laiiil  -h-w  a  t.tal  ni  mure 
than  .Mill, Mint  ,i|'  which  I-  ]n'r  cent  have  heen  killeil,  i'l  ])er  cent 
W'liiiile'l  ami  1  "^  per  cent  ca|Jti"-e.l  ami  nn-.-in.ir.  'The  in.ui  ji'Wer 
Iiis-^  t.>  the  Inite.l  Kin.L^il.,,!  ;-  diHicult  I'l  e-tiniate,  hut  ■  iii  the 
low  i)a-i>  lit  til  11 1  per  man  it  reache-  an  apiialhnj,'  li,L:nre.  1  ak- 
iti.u  t!ie-e  t"i;ether  the  liiirden,  in  .idditi'-n  t'l  llM-e  imji'-^ed  hy 
taxatii'ii  and  the  direct  <  .per,iti<  iii<  ui  the  'i'rea-ur\,  i-  lully  as 
^'reai  .1-  th.it  created  \<\  the  expenditure  i'<  t  the  -npp'  rt  <'i  armies 
in  the  lielil  .and  dnp-  ■  lU  the  -ea>.  It  i-  im]i<i"ilile  t.  ■  -ay  Imw 
^reat,  until  an  extended  -tud\'  <  \  price-.  pe'i-i"U-,  C'-t-.  ,ai;d  man 
|),,uer  lM.->e-  ,ind  the  depreciati' ill  '<[  tji  "d-  .and  ]iri.pen_\  d.vie  to 
-Infiini;  c  iinliticn.-  i.'i'  nulu-trv  can  be  undertaken. 


CHAPTER  IX 

Scanning  the  Future 

1  'I'ir.'tT.itic  <;. '\eriiiiuiU  lias  alua\s  i'nii)lia-izo.l  t!io  co.iijcrativf 
in.-tli.^.l  i<\  carrviii-  ..n  rhv  atTair-  <'.\  thr  ^taic.  In  .inliiiarv  tiiiK-. 
tliert;  i-  littlf  (litnculi\  in  (l,.iii-  tlii.v  iVrhap-,  thf  intcn-t  m  rv- 
Milt>  ir-  ih.t  i|n;tc  -..  iiitc'ii-c  in  pi-acc  time.-.  At  any  rate,  tlic 
division-  ,,i  ,i;,.v(.TnnK'nt  .1..  nm  ,-iI)arra--  each  -tluT  li\  .  .vrr 
zcainn-  -cannin-  ..,-  c,h-1i  ..th,T'-  art-.  In  -inie  m,"  u;,r  tlir  expen- 
diture- are  lar-er.  the  aet-  ..,•  the  l-veeiuive  MMre  arl,itrar\  and, 
ill  enn-e.iuence.  -reater  jiM-Hiihtie-  -i  trieti-n  e\i-t  thai  lead  tn 
<litticultie-.  (;.,n<;re-  ha-  ^iven  an  exa^llent  example  -i  this 
statemenl.  j-eelin-  that  lar-e  appp  pri.ati,  ,n-.  h,,ve  di-appeared 
iike  -now  hefnre  a  -nnmier  -nn  the  nu-niNer-  liave  called  iip^n 
executive  .itVicer-  In  <;hv  -utue  accunt  ni"  their  -leward-hip.  and 
Con^zress  in  turn,  ha-  endeav-red  to  .,■!  np  ->  .nie  -upervi-in<,' 
ayeiicy  ,,ver  them.  In  laiLdand  a  niini<trv  hacked  l.\  a  majuritv 
ct  tlie  llnu-e  .  1  l"nnim.,n-,  and  re-p..n-il,I,.  t..  the  ll..n-e.  w,,„i,'| 
appear  t^  he  i)rM,,i  a-ain-t  fricti-n  .and  mi-under-tandimr  uitii 
the  le-i-lative  hranch.  lint  the  -anie  -imaiion  ,.xi.,,  tlur.  a- 
m  .\merica.  .Meniher-  ha\e  the  -anu  leeluiL,-.!-  reni.Uene-.  in-m 
what  H  happenin-  and  exhihit  irritati-n  a-ain-t  the  leelm-  ,  t 
iKfin^'  in  the  dark. 


Control  <.f  X.\tiox.\i.  F.xfM-.N-niTruF.s 

Durin-  the  pa>t  vear  and  a  halt.  I'arhament  ha-  di-plaved 
.greater  mtent  nf  pnrpn-e  V,  kn.^w  what  ,<  ^Mim.^  ,.n.  an,!  v.  have 
a  laro-er  liand  in  the  finance-  •.{  the  c^nntrv.  In  lune  I'-MT  as 
nianv  as  ls7  memlxT-  addre-<ed  a  re-dution  tu  the  Chancellnr 
ut  the  L.\che(]ucr  in  the  follouin-  lan-uatje: 

n'i 


!!i;    FISANCIAI,    HISTORY   OF   CRKAT    liUll MN 


'I'liai  a  ci 'iiiinitlci.-  I'C  iippiiimc'l,  cun^i^tin^  ■  i'  nicinluT-  nf 
till*  llMU>f  uitli  ju'wcr  tu  rcvifu  all  nati'ii.il  (.xiicinliturf. 
examine  niini-tiT-  ami  i.itici.ils,  and  ri|i..rt   I',  tlu'   II"U>c.' 

It  was  prnpnm'd  that  tin-  c  luiiiitU't.'  shuuM  o  ii-i-t  "t'  mi'iiilicr- 
i.f  till-  ll'iU-i-  \,nli  a  rrfa>ury  MiVicial  as  Sfcri'tar\-,  and  that  it 
-h'  uld  ap]i"n!l  -iM-ral  -uhci  tnnntti'f-  w  Iv  i  -h'  nld  ri'\ic\'.  v\pi.-ndi- 
inrr  in  u^vcrniiR'tn  dcpartnii'iit-.  1  he  -nhc' itnnmtix--  \mti-  i^i 
rep'  rt  Im  till'  in.'un  v  iininitti-i'.  uIdcIi  \\a-  t.i  drriik'  whithiT  tlie 
fact>  -ii'  rJd  hf  i^iicn  unnudiali-  inihlit-ati'iii  ' -r  hu  withlu-.d  until 
aitiT  till'  war.  riu-  ajipr^  ia>.-li  l^'  thu  prMhlcin  nf  CMiitr' 'llin:^  na- 
tii'iial  (.■xpcnditnrc  \\a-  t"  In-  ir^ni  ilif  Im-iiif--  p.  iint  "f  \  icw 
with  the-  idi'a  "l'  plaiiiiL;  tht-  incniht-r-  ^'l  thf  Ihai-c  ;n  a  p^'-iti'iti 
t"  kni.w   wlii-tlKT  ilu'  natiwii  \\a-  rcccivnii;  valnc  I'T  it-  I'xpondi- 

tUU'. 

<  )nc  in-tancf  I 'f  di'iiartnuMit.i  i.\pi-nduurc-  illn-trati--  t!ii'  va-i- 
ne--  "I  (uiroha-t.--  and  tlu-  pi^s-iliilitiL'-  'i'  i\tra\'aL;arH-u  ■  .r  (.■cuii- 
I  'U]\ .  1  !u'  War  '  >it'nf  (  '..ntraoi-  I  )<'parlnuin  -j)i.-nt  dnrniu  ihrco 
_\(.-ar~   i!i.jn!\.   I'.'lTi  nv  .re-  than  iTi'ii  uihi.mimi.      ItliMimht    In;,.- 

(1(111,1  KM  I  \ard-  ••{  i-l'itli,   1  i:..<ini»,iMi(t  \ard.-  'if  ilainu-I.  :;:,.niiii, i 

kni\i-,  I'  rk-  and  -pi  ions.  pin.oiKi.iinii  jmiiiid-.  .if  hac'  'ii,  1 'M,|"||^- 
(lllll  pnmid-  "f  clicL'-i'.   .'aMi.dnit.iKHi   raii.'ii-  ..i    pri--cr\cd   nu'at. 

:;."•, .iHHi  l„,..i-,   L'.'..n(  11 1,11111 1  ^nu'kc  liclnR-t-,    pi.niHi.imd   h^.r-c- 

-hm-  at  d  inanv  Mthrr  tliiiu'-  in  |)ri  p.  irti"n.  In  -nch  tran-ai-tiMii- 
tluTt.'  were  inan\  Mpp,  rtnnitic.-  hi'th  for  uci'ii'  tin  and  wa-tc." 
d  Ik  \vr\  cxtfiit  <'f  the  |inreha>f-  and  tht-  ali-ence  <>i  tht.-  cn-t"- 
inary  hiid'^ci.  hacked  1;.  the  cai-tant  demand-  for  ee.  ini  iinv  l>y 
the  prt'>-.  reall\  called  f' ir  I 'arlianu'iitary  invc-ti^ati- 'ii  in  <'rdcr 
that  the  e<aintr\  iniL;ht  1  e  -ati-tied  with  the  -.leril'.ce-  u  wa-  inak- 
in,i,'.  In  it-  tir-t  rep.  rt  of  the  I'.'IT  .-e--ion  the  i'arliainentary 
(  "nmntlee  .n  Xatiiiial  l\])endi!iire-  CMiitendcd  that  (|ue-tinns 
I'l  c  -t  -h.  nld  he  taken  inic  acC'imt  in  cnn-idvr'.ni;  ( leiieral  Stall 
pr-L:rani-.       While   it   wa-  arj^ued   that   the   (ieiieral   Stat't   cnuld 

'London  Economist,  June  -'.   1  'IT 

Special  Keport,  Select  Lonimittee  on  Xatu.ial  l-Xiitiuiiturc,  ii.  ('.,  No.  1-''. 
AuRiist  1.  li'lT. 

;  /^u/..  Juno  7.  1!>IT. 

'  Fir<t  kep.irt.  Sel-.'ct  Cnniniittee  on  National  Expenditure,  11  C,  N'.i  l''l 
October  ^i,    V.ni. 


SCANNINC    Till.    KITIRK 


91 


ti'il  Ik.'  cxpccifd  t'l  lake-  intu  consideratimi  tlu'  iiiatti.-  •■]  C"~t  in 
tlccKlini;  uix.ii  the  (lt.'>iraliility  uf  stratci;ic.il  ])!aiis.  lU'vcrilu-lcss. 
tlu-  <  "niiiiitti-i'  CMiu-!u(kil  that  titiancc  i>  ju>t  tnic  more 
1  Ictmnl  ill  the  ]ir>>iilfm  that  iiikIit  ativ  o  iichtsion  invDlvcs 
man  pnucr,  tran-i)Mrtati<iii  and  time,  and  hciu-e.  the  -tatus 
■if  ih-'  liuaiK-ial  memlitr  ci  tlie  .'^tatV  -hnvild  he  maintaine<l.  and 
in  all  meeting;-,  nf  t!ie  Army  (■ninK-il  he  shi nld  either  he  pre-ent 
I  r  represented.  I  liey  f<nind  al«)  that  tlie  iMirmcial  .\d\i>Lr  in 
I-raiu-e  ua-  ii'.t  in  t^ncli  \sith  thf  i  itinTal  Stall  <  n  matter>  per- 
taining t.'  ei|nipineiit.  Seemint,dy,  tinaiKial  advice  is  needed  nii 
]irice-.,  manufae'iiriuLf  rapacitv,  availahihty  nt  lal»nr,  etc.  It  was 
al-'>  reC'jnnuiided  thai  the  War  hinance  ('Minmittee  he  revived 
and  a  review  ma<le  ..f  ihc  lieavy  expeinhtnre-  i-'r  n  irce^  ii  llu." 
Tnited  Kiii^'l'  in  liv  the  \\  ar  < 'ahinct.  l.iki".\i-e  in  tlie  matter  'if 
m-'mti'T,-,  tlu-  (  .iinniitice  i\  h  tiiat  there  -hi.nld  he  a  rarhamen- 
ta'-\  Secretary  cliari^ed  with  tlie  tinance  <>i  the  niini-ir\  a-  in  the 
ca-e  .  f  tinancial  -ecretarie-  to  the  .\i!:niral;\  and  War  ottices. 
Ah. re  elah.irate  re|i(Tt>  fallowed  ni  1  )eceml)er  and  March  tli.it 
dealt  with  jLirliainentary  estimate- and    Trea-nrx  cMitnil.' 

In  time  "i  war  the  -N-tem  of  expenditure  ha-  differed  in  manv 
re-pect-  from  the  >\ -leni  in  \i.L^iie  in  time  'f  peace.  X-i  e-ti- 
mate>  are  presented  t"  the  i  h  n-e  ■  f  (■.■mm.  in-  hv  the  War  I  )e- 
partinent.  Tlie  Ildii-e  \iite-  the  anviniu  "f  nii'iiev  reipirxd  hv 
the  expenditure-  a-ked  f(ir  and,  in  c 'nseiineiice,  the  Cuntri.i  nf 
the  I  rea-ury  ■  ver  the  -iien.liiit;  deji.artnient-  i-  much  le--  elTecti\i- 
tlian  in  peace  times,  'i'he  uncertaintie-  nf  w.ar  iireclude  a  p-licv 
tif  tenders  and  the  cnntinini,'  nf  expenditure-  within  tinancial 
limits.  It  wa->  the  \iew  <,\  the  (nmmittee  in  it,-  H-caid  rep -ri 
that  it  is  incmnp.atihle  with  the  iiuMic  inlere-t  t^  reipiire  e-ti- 
male-  in  re.L^ard  t.i  the  more  impi-rtant  vnte-  such  ;i-  -Inphuildin^, 
armament-  and  naval  wnrks.-  Xmie  of  the-e  c  .u-ider.itMn-. 
liDwever,  .apphe-  tn  many  hranche-  -f  war  expieiiditure.  and  the 
pr;nci])Ie  is  nn.-nund  uliich  due-  iii -t  iiernnt  effective  ontrnl  .  iver 


S.'i 


li''T.   nLCtniber    l.i,   I'tl 

'  Ibid.,  p.  :;. 


\fpTt.   Sek-ct   Lommittee   ■.n   Natl mal 


^IK  mi;ture. 


C.    No. 


'.)-' 


\l.    HISTORY   OF   (iKKAT    KRITAIN 


Mich  {,'(iVcriinK'nt  ovpviuliturf.  The  Loniinittce  \v;i-,  thiTcti>rc, 
of  the  opinion  that  the  ilr^rcc  of  om  ml  exercised  l>y  the 
Irea-'iirv  fell  far  slmrt  of  the  nee<N  "f  the  case.  Reasons  for 
this  situati  'II  were  achaneed.  i*ne  of  liieiii  liein.i;  that  the  Treasnry 
siatr  w  •  •  mall  and  the  task  beyond  it-  -treni^lh.  It  -ceimd 
desiralile  tu  correct  thi-  situatit»n  l>y  jin 'vidinj,-  a  suincieiit  siaif 
and  re(iuirinf,'  the  Treasury  t<.  ••xercisc  a  more  etticient  c-mtnil 
over  dejiartnients  so  as  to  nisnre  the  ad-'ptinii  of  sound  financial 
inetho(l>  in  f-m  pr-A  ince  of  adinnii>trati''n.  Matters  <>f  prnlits, 
wajjes  and  j)rices  were  K'vcn  cuu-ideratinu  t-y  tlu-  (  ■■nnnittee. 
Xi.  new  advances  in  waf,'es  should  la-  inaile  without  (.arcful  -tud\ 
of  tile  situation  and  when  s.,  uiade  shduld  apply  to  .ill  induMru'- 
I'rotit-  -honid  I'v  l;i!iitt-d  .111.1  ihf  provi-i.-M-  for  i--inr..!  inatiTiallv 
stren.ijtheneil.  .-md  so  far  a-  po-Mhle.  the  i;.  .veninK-nt  -h-uld  .iv-id 
the  cre.it^  .n  of  new  credit-  in  tinaiiciiiL:  the  war. 


CuNCUfSION.s  O!     ('oMMiriKI.   ON    W    \K    i'.X  I'KNIlI  I  I   UKS 

A  111. .re  txtiii.'u.l  e\ainiiiati.  .11  of  tiu-  ( '■  .inniittee"s  viewpoint 
will  di..u  tile  .litticuhK- ..f  war  uinlertakin.t;-  when  viewe.i  ir.in 
the  liiiaiici.al  -i.!e. 

Tlu-  ure-;iti'-t  ..f  the  -pLiidiiii;  mini-trie-  '-  th.'.  ..t  Muiiiti. 'US.' 
Til!    iiiiiii-tr\  rem. nil-,  -ay- the  l'. 'iiimittei.-. 

a    -rial    hm  in:;  aii.l    -elliiiL;   c. 'lu'erii.      In    pr;icli.-all\    evcrv 

hraiu'li      i    ;!-   a..-ti\it\.   exiieiidiiure   "i   iii"iu'\    i-    ,nv.ilvi'.l. 

it-  iiriiicipal  .Npcii.liture  i-  -till  1>\   c  .iitract  iii  the  ;inrciia.-e 

.1    (-1.111111.  ('nie-.    r.iw.     -niii-mamiiacturcl    .  .r    c  .iiipli-iviv 

niamn.n'tiireii. 

hi  .all  thc-e  malter-  tlu-  iiiiiii-trv  are  iir.icticallv    ihe  tax   p.a>er- 

.,ii]\    -ecnritv  ih.it  thnr  in.  iu-\    i-  wi-el\    -pent.       1  he  I  .  iiimittee 

\\a-  uiiaMe  to  Iin.l  ih.it  -iilVuieiU  ree'.  .-mti.  .n  of  the  tni-lee  rela- 

ti,.n-liip   hail   heen   ar.i'pte.l    Lv    the    Muiiiti.'ii-    .Mini-tr\.       "i  In- 

statemeiit  also  a])plie-  t..  the  ..iher  expeiuhiiL;  a^eiicie-.      In  cii- 

se(|uence  the  attitude  of  suppiv  aii.l  liiiaiice  Lranclie-  ..u-lit  to  he 

th.it  ..f  v\<  -e  ineii.l-  ;iiid  e.i.uer  helper-        Thi-  the  I'.ini  nttee  di.l 

'  Kcp.Tt  Sc-=i.'ii.  l'''"-,  Si'lcit  C._.intim!ic  ■■■..  Nati.Huil  Kxpcndilurt-.  N.., 
•-':i,  March  «.  H'l'^,  i>.  t. 


sc.\> 


HCE    FLTIKE 


!tH 


not  Hml  to  Ik-  wholly  trm-.      il,i.!  it  Icen  tlic  c.im-  fli, 
partment-  umiM  liavi-  afforded  evii  the  fmnncc 

branches  in  tlii-  work  thty  uiTc  tloiriR  iii>tca(l  ot  too  often  regai  1 
iii.l;  tlicin  a>  an  actirl  liiiulratico. 

Since  soineluuly  nnist  pay  the  hili  the  Omitiiittee  report^  that 
Treasury  control  mu-t  in  tlu-  la-t  analysis  he  a  -anrtioninj,'  con- 
trol, i.articularly  a>  applicalile  to  capital  exijcnditnre.  i.arj^e 
Miin-  uj)  t..  (late  hav.-  I.eeii  >pent  liy  the  Munitions  Minisfrv  in  the 
I'.rni  ..f  capital  expenditure.  The  latent  coin]iuiation  places  such 
c\i)en(litur<-  I.v  tin-  .  .iie  niini<try  for  national  factories  at  li.r,.- 
""".""•^    lir.mtsf.i.risate  firm-.  *•  t  capital  expenditures  amount 

'"  *•''■■.""". and  llT.'Mio.ooo  ua^  spent   f..r  t,.,,i,  and  e.piip- 

ineiit  Irsiilvs  ,1,!, lit:., lis  f.  priv.ite  i.laiits  that  inust  l>e  paid  for 
'11  the  basis  >■{  ,i!l.  .\\,m..-es  v,ir;.in,L;  uji  t^  I'"i  ]i,t  ri-m  friiu 
excess  pr.,tits.  \ttriiipts  NviTc  ni,i,le  1,;,  the  minister  in  l''ebrii- 
ary.  I'.M7.  to  super\!se  c.ipit.i!  exjicnditiTcs  ui  rel;iti..ii  t.p  tinancc 
nil. 'II  .1  iin:per  basis  I,y  crcatiii-  a  In^.-ml  t-  o.iisj.ler  expenditures 
\'\  c-iiip  lied  est.illidiiiK-ii'.s  uheri  tlic  ;iii!. .imt s  wrre  iii-re  tli.ni 
£."."11.  i;„t  fVideiK-c  .,1  ihe  ciiairuKtii  ji.  mi-  t.i  tin-  \?x[  that  iliis 
i"'.-ir.l  u;.sC..ni|KlIed  !..  .accept  ilie  u,  nl  ,.{  tlu-  lie.ad  ..f  the  -npplv 
dep,irin;em  iiiv..be.l  in  the  tr.aiis.acti.  .ii.'  I  iidcr  tlu-  d.ate  ..f 
M.irch  .;,    i:,iv.  ,!„.  ,.^,,„,r,  ,,,-  ,i,^,  ,  ,,,„„,„t,.,.  ^,„^.^  ,1,,^^  ,„  ,|,^. 

i.tst  leu  weeks  the  functions  ,,f  the  Muiiiti.  iis  W,,rk.  l;,,ar,i  h.ivc 
been  cmsiderably  m.^dilled.  I -iider  the  neu  pn  cedure  all  ca-es 
involvin-  tlo.ooo  ,,r  in. -re  nuist  be  referred  bv  this  l,.,ard  to  the 
Cmtn.ller  of  .Muniti..ns  1, nance,  and  v  iu-re  the  am.  nnt  is 
£.-,.i,nuo  ,,r  upwards  the  prnp,.sal  nuKt  be  submittal  t..  the  Treas- 
ury for  sanci-.n.  1  )esp,te  these  provision-  the  ( -omnnttee  are  n..t 
o.nlident  that  the>  will  s,a,re  anv  real  improvement,  in  their 
opimon  multipiicati..ii  .i  reference  n..t  .iily  .add-  |,-,r-el>  l,  delay, 
but  it  alsii  weakens  respousiliilitv. 

Ihese  statements  make  interesting  rea.lm-  in  uea   ..i  di-cus- 

si..ns  in  C.n-ress  ,  „,  the  o.st  ,,f  ,he  war  an,l  the  recent  l;..r-hnn 

incident  m  connect!,  ai  with  the  linn-  pn.^r.am.      In  America  the 

evidence  indicates  pi.,cedure  without  a-lequate  accountin-  .  .r  ti- 

'  Hid.,  p.  7. 


r 11 ! :  I  I : 


sAN(  lAI.     llI^ldKV    (iF    r.KIAT     HRITAI.V 


iiaiiual  c.  iur.>l.  1  lie  lui^li-li  have  learneM  the  .laii-cr^  ace  air 
paiiyi.iK  -ue-h  lack  oi  c<...r(linati.-n.  It  "he  i,v  per  -le].-  ha.l  l.eeii 
taken  in  the  he-i-iniiiL;  the  ].re~em  -\>nn\^  .i  ret'  rni  in  the  Imi^- 
li,sh  svstem  would  ii'-t  nww  lie  ncce>>ary.  1  he  ditticulty  lie-  m 
the  failure  to  consider  iiece>Mty  and  t'lnancitil  -anctmn  ln-^ether. 

Ihe  prMper  autliM.it^  t'<ir  undertakiiiL;  thi-  cn-iderati' 'ii 
\\a-  and  i^  the  hnance  branch  'i  the  inini-trv.  .  .  .  1  he 
e>tai)lishnienl  nf  >ucli  a  procedure  W'.uld  imI  >.nlv  -ecure 
nil. re  sati'-factnrv  tinancial  c-ntr'  1  in  th.e  interc-t  oi  eon^mv. 
Inn  wniild  actuallv  ;is>i~t  in  the  pr.  Mhicti.iii  <■!  nuniili-n-. 

The  pmlilcni-  <'l'  o-t   and  pr.  I'lt^,  liitclied  a-  they  are  tM  the 
excess  profits  tax  and  the  iiic  .nie  tax.  have  i  een  c-ntinnall>-  l»e- 
f.ire  the  -upjilv  (hvi-i-n-  and  the  tinance  department-.      I'-ut  little 
sncce-  !ia>  heeii  -ecured  :r.  a-certaininL;  the  c-t-  .-t  inanui'aeinre. 
Kven  the  Chancelb      <<i  llie  I'.xcheo'.'.er  ai.pear-,  ace  rdiii.<;  t-  the 
Cnniinittee.  t'lhe  nii-int'ornied.'      Tlie  linance  hranche-  ii:  Jeiault 
of  facts  from  the  -iipjily  department-,  h.ave  n-ed  three  ineth«ul>; 
(  1  )  that  i;t  nrikint:  detailed  examinatii  n  ><]  C'^^-t-  m  natiMiial  tac- 
t,a-ie-.    (  1' I    inve-       itin.i;-  c-'  oi    private    lirm-  h\    acc^  aiiit.aiu-. 
and    (  :;  I   analyzin.i;  o  -ts  ..n  the  ha-i-  "i  a>cerl.inKd   time-  and 
places.      Tin  re  dMiild  he  in  view  >n  the  lack  >■]  real  ini-rniaii.m 
a  caret'nlK    nr^ain/ed  co-t   inve-ti'^ati.'ii  l.)rancii  a— .  ciaied   with 
the  c-Dtract-   hrancii.       A-   to  pr-t'it-   inncli   nncertaint\    e\i-t-. 
While  the  excess  jii-oiit-  tax  and  the  muniti-n-  lev>    largely  af- 
fected actual   prMlit-  there  i-  ,L;reat   variance  in  pr.  lit-.      In  ■  ne 
case  in   i'.'lT.  ,i  lirm  -ecr.re.l  a  pr.  .lit  <.f  --'T  Jier  cent  .  .n  ilie  Inru- 
.'vcr  before  al!..\\  in-  f.  .r  depreciation  "i  ■'■  1"  per  cent  .  :i  the  caiu- 
dany  odier  ii!-tance-  mii;ht   !e  cited   indicating  the  d.iin- 
cullie-  and  the  ca.re  nece--arv  to  protect  the  Xati.  ii.il  d'rea-nr\-. 
The   tr.an^^action-  in   the   .Muniti.  n-   Mini-try  clearly   indicate, 
a-  the  I  .  ■minittee  ^ho\v.- :  ' 

i  1  )      The  pred,.  ininaiit  jHiwer  ..f  the  -ni'Iily  branches. 

{■2  )      The  ill  eifects  of  collective  bar-ainin-  and  J.at  rates. 

'Kcpo-t:   Session.   l''l-.  Sik-ct  C.-.mmitto    on   .Vationa!   Exiniitliturc.   No. 

■  Ibid.,  p.  1">. 


scANMNi;  Tin;   i-t  riRr. 


95 


( •!  I       I  hf  lu-oi^^iiv  fi.r  full  ti'chim-al  (.-iwt  iiivt'^tiuatiMH. 

>  li       i  !u'  a(lvi.>al)i!ity  m'  takin.L:  iiUm  ccii-nicraii.  .11  a  prewar 
-laiKiaril  nt  rt'tiirti  ci!  capital. 

(  .■>  I  Tile  (ii-Mval.ility  "f  laviii-  (!''.\:i  tlxe.!  rate-  ■■f  jirciit. 
Mu-!i  ^j.i'cilic  ^tati'itK'iit-  made  ai'ti-r  tn.  tc  than  .h-  ^  \ear>  <•' 
war  >h(i\\  Ii.,w  i-"fii;ial  tinaiu'ia!  .^r^aui/ati.  iiis  are  Im  the  eiYeet,\e 
•  hrectiMi,  ,,f  tlie  war,  and  uliat  i-  niMre.  the\  p-.im  t-  the  iiei-e-Mty 
'■t  an  early  e.  nii-IiaiK-e  with  the  — tiiid  uiMi,,m  u-rked  miu  I'r-ni 
tile  [■ai-li-h  experience. 

'  111'    i'"Mi  V   Ml-    C'nMIXfOfS   r.cKivDUI.Ni; 

While  I, rear  Ihnain  ha>  -^eitleil  duwii  v,  the  j.  licv  ..i"  e.^n- 
tintMU-  h.Tr.win-  nian\  adx.cate^  .it"  hea\  ier  taxati.n  have 
ur-ed  the  i^  vernnieiit  t..  exact  a  lar-er  part  .a"  the  war  cost 
iruiii  the  .  wiur.  .n"  wealth.  (  )i  late  increa-ini,'  miin'.er^  <,\  pro- 
posal-; have  heen  ir.ade  -.u-L;esii,-  ;,  ^.w  ,  ,„  capital  <.r  o  ^u- 
-crij)ti-n  ,if  \'.ea!th.  ddie  ih-u-ht  hehind  thi~  i>r-p.,^al  ha- 
hecn  ninre  lar  reachin-  than  t-  meet  the  dav  t-  ,lav  expenses 
"1  ihc  cutlict.  It  ha-  had  m  mind  the  redncti-n  ,,1  the  pn-tuar 
<lel,t  U.  mana-eal.le  pr  >p.  Tti.  an.  .\.  the  pmp,  :.i.r-  have  pm  it. 
the  C'-tintry  i.ace-  an  annnal  deficit  i.f  t jc.n.iNiipjinn  (  )„]>  ,|,^. 
m--t  drastic  taxati.  .n  can  meet  the  .lem.ind-  that  will  he  made 
"11  the  Trea-urv.  The  .dternative  appear-  t..  he  a  cajjital  levy, 
diic  I'd.tMr  ,,t  the  I. .,!,!,.!,  !h,iiy  .Vc:..v.  Mr.  (Jardmer,  -lan-  the 
matter  uj)  in  thi>  {■  rni : 

The  capital  ■■{  the  individuals  .,1  the  iiatiMii  has  mcrea-ed 
durint:  the  \^ar  tr-m  -ixteen  th..n.-md  niilli,.n-  t..  twentv 
th.^n-an.l  milli.ni-.  .\  lo  per  rent  I  c-,  .  n  thi-  um,,],!  reahVe 
tw-  th-iii-and  milli'.n-.  ft  wmiM  evfi„;.,,,\l,  ,|,,i,,  ,,,  ,1,,^^ 
aniuunl.  and  reduce  the  intere-t  .,11  deht  hv  -ne  hundred  and 
twentv  i>iilIiMn^.  In  d-in-  -.  it  vv..„!d  iiearlv  halance  Lnr 
1nids:et  aii.l  prc-erve  mir  ii.atiMnal  --Iveiicx.  The  lew  w.mld 
h<' cr.ndii.ated  -.a\  .  ".  per  cent  .11  i'.  .rtniie-  : .  r"  il.diio  to  i'-'o  - 
•»(>ii.  1(1  percent  ,.u  ii'o.uoo  i, ,  f.Mt.ooo.  „,,  ,,.  :;<»  per  ,-ent  .  .11 
stims,_,vera  million  .  .  .  [The  individual!  w,,uld  pav  it  in 
what  t,.rm  wa-  convenient,  in  hi-  -f.-ek-  ,.r  hi-  -liare-  his 
houses,  ,  r  hi-  tield-,  in  per-,na!tv  or  realty.' 

'  LoitJun  L'a:l\  Xcus,  Soptcnit'cr   I'..   P'l: 


96 


THK  riNAXCiAL  ni-iuRv  i.r  (,ui:Ar  !,kitai\ 


I     \1'I  I  AI.    '["aXVIION 

Thf-c  pf"]).  -al-  hrivf  lakfii  a  iii'Tc  il'jtiniti;  and  -crii'U-^  inrni 
in  the  la-t  --ix  n!..nth~.  The  War  Imikt^i'Iicv  Worker-'  Xatiniial 
(  (iininiitta-  in  c^  niim  .11  with  tlu'  Tradf-  rniiai  (.  ■ini:r(.->.  ilic 
l.al'r  l'an\  .iml  \hv  ln<ln-trial  TripU'  Alliance  arc  ikanaiulinL; 
"  ik'tmiic  (.-. 'ii~cri|it;i'n  I'l'  riclit.'-  a-  a  ~ub>iitntc  !'■  t  tlic  rai-inu 
(l'  nil  in-  ni.'iK'v  ^n  I<ian."  Tlif  iMniniitit'C  -u^i^v-t-  thnx' 
nu-tlii  "1- : 

ill     \  capital  tax  ^radiiati-i!  t'l  -i'  ]icr  cent;  a,  death  duty  on 
ivcr\lMii\   uliM  die-  uitii  prM|)crt\  "i   t'-''*"'  "f  ni'^rc. 
(1')    i)iail'k-  the  jjre-eiit  incmne  and  -\i])erta\. 
I  :'.  I    Se(|ue-irate   all    unearned    nicine,    e -taM-.-hinL;   a    iiuhlic 
tru-tee  t"  jiruMde  -nli-i~tencc  alk'w  ance-. 

It  will  he  -eeii  that  what  ajijieared  a-  a  the' Tv  <<i  jti-tiee  1-  ii'-w 
-liapmu  it-eli'  int.  a  p.  dita'al  .leniand  that  nia_\  he  I'Tced  iip^n 
the  i:M\i-niinent  a-  a  linancial  ]i''1k-\-. 

\\  ith-ut  U"in-  int"  tlie  i|ue-tiMii  .,[  the  acciirac\  "f  tlie  state- 
ment reijardm.i:;  the  increa-e  <m'  indi\  idnal  ca])ital  h'4din,u'>  it  is 
-uti'icient  t'i  CMii-ider  the  principle  inx.-lved.  I  he  ~tatc  inu-t  tir-t 
accp.nre  the  part  mi  the  wealth  it  i-  pr-j).  i-ed  t"  take.  1  hi~  1-  m 
n:an\  t'-rin-.  Thr  -ni>p. -iti.  .11  i-  that  the  .  wner  w^-iM  jia)  the 
lew  made  up  ti  him  either  hy  check  ■ 'i:  hi-  hank  accnnt  nr 
\<\  the  -ale  -f  hi-  jir.  iperty.  'i  hi-  w^nld  inv.ilve  man\  dit'ticulties 
Mt"  a  i'ar  reachinu  character,  leadin-  t  ■  tiie  kweriiiL;  -f  price-  and 
the  denr  iralizatinn  ni'  tlie  market  I'la"  -uch  c< 'mm"ditie-.  Ii  the 
-i.-'.te  entered  upmi  tin-  ])i. 'jict  the  -impler  nieth'ul  wnuld  he  t' > 
retpiire  all  h'1<ler-  •■(  ]>riqiert\  V<  jxiy  the  lew  made  at;am<t  them 
m  L;i.vernnient  -crip.  If  nut  paid  lail  "t  pr^'pert}  h.  dder'-  mc  iiiie 
the  -crip  WMiild  have  t..  '  e  acquired  hy  h'.in-  from  hank-,  enor- 
in. 'U-K  increa-m-  the  inil.itiMn  U' av  e'linplained  <'t.  In  the  tmal 
aiiah-i-  -ncli  a  lew  i-  in  tact  an  inc.  ine  tax  ha-ed  ^n  pr. iperty 
wliH-t,-  valiiati.'n  at  any  time  i-  a  matter  "\  .mreat  d.it'ticulty.  It 
h.i-  hn-  heen  rec.  !L;ni/ed  that  an  inc  .me  tax  i-  -uiier'..r  to  a 
jir.  .jiertx    tax.  f.  .r   it   .leal-   iu-tl\    hetueeii   -pen    cr-  and   -.;v-jr^.' 


scANMNi;  Tiir   rr  riRK  '.17 

71k-  levy  nn  capiuil,  li.  wi-vir,  ihr.i\\<  tlic  I'lirilcii  up(ai  iIm-i.-  \vh'> 
lia-c  ,-;i\t.'i!  and  accuinuiatcd.  -trikin^  at  tlic  vltv  I'nundatii  n  ■  t' 
the  iiatii  11'-  caimal  t'liml. 

11k-  l>a-i-  i.ir  tin-  -n-^di'in  rc-f-  tip'  11  tun  pri'positir.ns. 
(  )iit.-  i>  that  the  Wealth  "i'  man  hvini:  iiK-a-iiri'd  111  in^  au'\  can 
ht'  t.-a-il\-  iran-Iati-d  int.i  in^iK-} .  I'Ik-  .  iIkt  -pruK,'-  ir.  ^in  the 
antaL;(  P'  rn  lietween  fapital  ami  lalmr  i-\iiri-.>t.-(l  in  the  \ie\\  that 
if  the  inanh."'.!  .1  the  C'.nntry  i^  ei.n-cripteil  >m  -houlil  it,  wealth 
lie  taken.'  I'etueen  iIk-  i\\<>  there  i>  nn  anal(i<:;v.  f.^r  the  ^ei/:ure 
•  if  wealth  reduce-  ihe  i>r.  (Iiicuk:  |)"wer  tipun  which  the  nati-n 
must  depend  I'^r  the  very  UK-'  nie  winch  i-  required  I'^r  the  in- 
duct "f  the  WAV.  The  aruuineiu  undMul-tedly  p.Mnt-  t.^  a  heavier 
iiK-ntne  tax  Mr  a  -|iecial  tax  u\>''U  the  wealthier  cla--e-.  I'he 
ditncultie-  in  th.e  way  <.l'  a  levy  nn  cajiital  are  -. .  ■;reat  a-  to 
t'-rce  the  -rate  i-  u-e  e\ery  etlMrt  Im  -ecure  additional  uicmhk'  l.v 
heavier  taxaiii  <u. 

While  taxation  in  ( ireat  1  Britain  ha-  I  een.  c-nipared  with  peace 
tuiK--,  heavy,  yet  it  i-,  the  opinion  of  an  mcrea-ui-  -ch.^.  il  that  it 
ctaild  lie  -till  heavier  with  advanta-e  to  ihe  ci'initrw  "  (  )l!- 
\iou-ly,  -ay-  I  lu'  l-.c;;  mist.  "  taxation  i-  the  HK-an-  of  Jiavitii^ 
for  the  war  which  does  least  harm  hoth  after  war  and  durini; 
it.  aiKl  in  thi-  re-pect  .Mr.  l;.,nar  Law  ha-  1  ack.-iid  -eri..u-lv  from 
hi-  predece--.  .r'.-  not  too  co.ura-e.iu>  record."  Idie  \iewiioint  ..f 
.Mr.  !;,  nar  Law  i-  that  \ou  can  not  -et  h-th  loan-  and  taxes. 
"  in  m\  helief."  he  sa\-,  •'  notliin.i,'  could  he  w<T-e  f.  t  the  countrv 
than  t.i  lay  _\our  taxation  upon  -uch  an  over-.vhelmin,^  ha-i-  that 
every  iiK-ans  of  carr^in^^  .ai  would  he  taken  awa\-  altogether."  - 

I\.\IIO   OF    T.WES   .\.VI>    CoKKo\\l.\(;.- 

ju-t  what  pr-portion  -hould  he  maintained  heiween  horr^w- 
in-s  and  the  amount  to  Le  raised  hy  tax.-ition  can  not  he  deter- 
mined, e-pecially  when  the  end  ■  f  the  war  i-  not  in  -i:,du.  d'here 
IS,  houe\er,  a  choice  'etweeii  jiavin-  h_\-  present  ta.\;>tion  .,r  hy 
taxation  in  the  future.      War  make.-  no  return  of  products  f , 'r 

'  riu'  .-InuaH.t!.  Ocf'lxT   1''.   I!'i: 
'London  Lctiii.iiinst.  Jiu\\   :il.  !'<]7. 


'J-^ 


IIU;    FIN.WCIAI.    Ill.^TMKY    "1"    ilKilAl-    DKIfAlN 


the  >an\-d\  nu<\  it  <'\v^h\  tliLTci'.  tc  I'C  i>ai'l  i^r  as  it  ^mc--  mh,  ^o 
lar  a-  ]i"-~il'!c.  '1  hf  fsin-Ticiicc^  in  prcvmus  w.ir-  .ili'T'l  no 
Iiflp  in  tlif  >'iluti'ai  "f  tlic  diuicuity  lx;cau-i:  "i  tin-  \ar-t  -nni^ 
expended  in  thi-  war.  (  ertainly.  ^ne  fundanient.il  principle  aji- 
pearsoiit  of  it  all.  and  tlia!  i-  ihal  the  interest  on  the  deht  niu-t 
'he  jiaid  I'ut  of  taxation.  Tliere  are  two  ntlier  charges  that 
.-hi.uld  lie  faceu  in  the  -aine  way,  the-e  are  the  maintenanee  "f 
an  ade(|uafe  sinking;  fund  and  the  f'^t  ^<i  pen-ions  f<ir  di-aMed 
nirii  and  widows  ani!  < -riihaii--.  In  tune  "f  war  a  nation  can 
hear  hi-her  ta\e>  than  in  jieace.  A-  the  war  --e  n  the  rate 
of  intcre-t  increa-e-  and  the  .Ljovernnient  exi)(-n<iinn  .-  are  p.i' .re 
lavish  i.ut  "f  h'lrr'Aved  iioney  than  out  of  niMiiey  rai-ed  l^y 
taxation. 

\..  ..lie  ha-  nrL'cd  an  exclu-ive  !■  an  p^  .hey  f. t  the  rea-on  that 
])ulilic  credit  depend>  upon  the  u  ilhn-iu--  of  t!;e  L;overnnient 
to  sui)port  it-  loans  liv  -uli-tamial  taxati..n,  which  in  turn  chocks 
])rivate  expenditure-  and  h.Jd-  hack  the  iir.-hinu  i-rce  -i  ri-ini.; 
price-.'  Idle  lMi;^li-]i  <  io\  erninent's  li  ii-  experience  pointed  the 
wav  to  a  loan  ])olicy  at  the  out:et,  -ince  taxation  adju-i-  itself 
-.lowlv  to  tl^e  chant^ed  condition-  and  income  nni-t  he  had  at  the 
-tan.  Tiiat  there  wa-  to.  >  ni;:ch  delas  in  inaUL,'nratinu  a  tn^  re 
adei|uate  svstcin  of  taxatio^n  is  jirett)  wed  maintained  iiy  the 
fact-,  'idle  -ii'  rl  term  note-  ii-ed  -"  exten-iveiy  re(iuired  a  cm- 
-tant  re-' lit  l"  hank  fund.-;  to  liiiance  them  and  added  to  ilie 
inllati''!!  ])r>  ce--.  ddie  h  n^er  term  hi'iid-  iiroved  a  in^re  -a:is- 
facti 'r\  meth'd  ^f  -ecuiini:  fund-.  In  fact  tiie  .t;i>vcrnmeiU 
found  that  the  tliree-m"iitli  Trea-tirx  note-  and,  the  three-year 
l".xchei|uer  h-iv:-  fed  dtie  at  period-  -o  -hi  :rt  th.at  they  (.inhar- 
rassed  ih-'  l.iruer  "]ierati..n<.  lireat  ilritain  h.is  li.ad  the  .id\an- 
tafje  'f  f'  reii^ii  i"  irrow  ini;.  and  -o  h,a-  been  ahle  to  supplement 
her  tax  revenue-  not  otdy  iiy  the  1  'rr.  v.uil;-  from  her  owii  pe.  ^ple 
l.vd  from  the  L'nited  ."^t.ate-  a-  well,  ii'-w  ,-onn  thi-  door  will  he 
closed  i-  :i  matter  of  conjecture.  Tlie  -teadily  m.  liutiiiL;  war 
costs  in  .\merica  will  iucrea-e  the  ditViculty  of  forei.qn  horrouing 
.and  force  her  t.    reiv  upon  -avint;-  and  taxation  more  extensively 

-,        ••;.':    .•'       i     !'i-'I. >.•:■■''■!■•••■>•;.   .'    :ir:.<.'     -t   i   ■     :  'u::',-.s,   Mav.   1!'K. 


^c.\^•^•I^•l;  thk  Ft/rrKK 


9!) 


than  -he  Iia-  _\ft  ^I'lic.  Tlic  adlicrciico  thcref.  tc  t>>  aluui'lant 
taxati'iii.  aiiil  a  ui-t.-  >_v-tL-in  'if  l^an-  arc  ali<'ilutcl\  necc-^arv  to 
th.f  C'.iitimiaiu-i.'  ><i  the  war  The  iMinniti.  .1.1-  I'laii  ti^Hcv  lias  siic- 
cet'dci!  i'airl\  well.  !.;it  the  ci  iniii-  year  >\ill  iMmi)el  a  >till  t^'reater 
effort  and  iarL;er  -,nTilice'~  in  taxation. 

The  I)n(I;;et  -peech  of  Mr.  I'.Mnar  Law  .  in  April  -j:;,  l'.M>,'  c  m- 
hrnied  thi-  c  inclusi'in.      At  th''  time  when  he  t...  ik  nt'liee,   I'.Mi:. 

the  i.iid-ei   \va-  ti'.niiti, i.nno  ;n   r-nnd  ninnher-.   tlie  prnp.,..ed 

lnidL;et  f..r  r.'l^-l'.i  h  calculated  at  iL'.'.'TL'.oiKi.iriM,  I'h^.  ^alls 
iri'in  the  \llie>  fi  a-  tinancial  help  cuntinned  iu-t  a>  L^reat  as 
het'ire,  de--pitc  tlie  defeclii^i  cf  the  i\u>-ian-  and  the  help  nt  the 
I  in'ted  .States.  'Idle  new  l.nd,L;et  ahandun-  the  j)etu!\  jiust  and 
diiulilo  it.  place-  a  tax  mii  che(|ue-,  prupn-e-  a  tax  .  n  luxuries 
and  the  placini:  "t  t'anner-  under  the  pruvi-inns  ,,{  tlie  incnnie 
tax,  with,  -iinie  additinnal  ini  idihcatiMn-  ulin-e  detail-  are  in  it 
availalile  at  thi-  writinu.  The  incniiie  tax  remain-  as  lieii.re  and 
nil  chan-"  v.a-  made  in  the  exce--  jirntit-  tax  <>i  importance. 
I  he  (  hancelliir  i-  restn',^  hea\ily  upi  11  the  return-  irpm  the  C' in- 
tinuciU-  loans. 


Fl'TrKi;  (.'o.MMKHCi:  .\.xu  Tk.v 


Di: 


.Although  faced  ly  -uch  -eri.  u-  pruhlem-  i:f  immediate  unp.  irt 
(ireat  Untain  i-  1.  ■  kini;  ti .  the  future,  .^he  due-  not  concede  the 
Xew  N  ork  claim  that  tinancial  a-cendency  ha-  pa.-seil  to  that  cit\. 

.\ew  ^  (irk,  ]t  is  true,  in  recent  vear-  lia-  made  -mall  l-iaus 
to  ehiua  and  ja]),,  ;  ;uid  cun-ider.ai.le  capital  iia-  heen  in- 
vested in  I  anada.  .'severihele-s,  th.e  Tnited  .<tate-  will  h.i\e 
a  very  -erious  -ituati.n  it-elf  Xn  face  during  the  c-ur-e  i.f 
the  war,  as  f.ar  a-  linances  are  concerned.  Dunn-  ihe  next 
ei,L;hteeii  munth-  the  Republic  mu-t  find  .■fT.'iO.nonjiiii)  .,,  re- 
fuiu!  maturing  (.liliy;ations— m.  -tlv  indu-tri.d  .m-l  r,aiir-;i<! 
I'ond-  and  -h-rt-tinie  ni.tes.  d'iien,  .i^ain.  t-  that  :n;i-!  le 
adiled  ;i  -lun  nf  at  lea-t  ,-^{,",11,(100,(1011,  f,,r  the  ei"hteen 
m. mth-'  ptrv  .!,  .a-  the  Tnited  ."-^tates  n..rma!lv  receives  fr-. .in 
I'.urope,  fur  investment  purpuses,  almut  ,S.'!iIo.(1(Io,()imi  ;i 
ve.ar.  Wdien  nue  recalls  th.e  very  i.;reat  (.iitficultic-  which 
'  /'jr;Mi)i,j;.M. _v  l\!'atcs.  li.  L..  <;inu   date. 


I  III) 


I  1.1,    1I.\A.\(   I M.     I|I>|mKV    ,,1     i.KlAI     1;KI1A1\ 


niif  III'  ilu-  ru-'iK-t  iiiH-  in  tlic   rnittil  Mate.-,  liad  In  iiK'ct 

ill  seciiriiiL;  .SHi.imhi. i,,  ,li  ^-liaruf  i.lili.i^atn.n^  to  l-.ti.t^li-h 

(Tfilit.-r-  ai  the  "utlircak  ni  tlic  war.  it  will  he  -ceii  Il.w 
aii-iini  ait;  ilic  c  niuiili. .n>  nf  a  certain  -t-ctMn  mi  iIk-  \nieri- 
can  lire--  ami  pL.  pic  tiiai  .\\-\v  N  i  rk  (.•.in.  i.r  will.  ili>pla>.a- 
1. 1  ■mil 'M  .1-  the  W'.rM'-  ijankiii;^  and  itn  I'-tnie.i!  ri-iiter  alter 
tlu'  war.  Xm  .l.iulit  in  the  \ear-  t"  d'tne,  \\hen  the  limine 
market  ha-  lieciiiie  -aturateil  with  capital,  the  I  iiiteil  States. 
a-  the  uealthie-t  -inijle  nati'  n  in  the  Anrld  will  have  a  threat 
r.  le  to  p|,.\  in  the  lield  ..f  i"'irei,L;n  inve-Iiiient^.' 

Tin-  -tateiueiit  I'i  Mr,  Swan-i'n'-  w  a-  written  in.  the  I'arK  ijav- 
•  i'  the  war.  ."-'nce  then  .\e\'.  \  <  rk  ha-  I'manced  the  \nt,d.i- 
I  reiich  liiait.  l\u--i.in  and  Italian  1-an-.  The  i  i.  i\  eminent  "i 
the  I  inted  .state-  nji  P.  .\pril  1.  I'.il-,  li.i-  e\teii''ed  credit  .-I 
,<_<..-,nu,iMHi.(inii  t-  t!ie  i:n-;li-h  liiiveriuneiit  and  the  American 
-ecnrita-  held  in  hjiijland  have  heen  in  a  larue  nua-ure  re- 
ah-.Thed  in  thi-  ci'imlry.  The  -itu:iti.  n  ha-  markedlv  chaiii^'ed 
and  i^i\en  a  new  em]iha-i-  p.  th.e  earlier  e\aL;L;erated  claim-  i.f 
lair  lin.incial  nietr^  p.  li-  in  wi-rld  leader-hip. 

\  va-t  -chenie  i-  n.u  muler  way  u>  meet  linancial.  trade  and 
-' cial  |irnl,kni-  aider  the  war.  The  I'.riti-li  .Mini-tr\  '•!  Kedm- 
-trncti.  n  ha-  completed  a  li-t  ni'  cnninii--i. .n-  and  C'mmiltees 
tiiat  ha\e  in-en  -.-I  np  I.,  deal  with  i|ne-li-n-  which  will  ari-<'  at 
tile  ck  -(,•  ,-1  iIk-  war."  The-e  include  devek.iJinent  "f  trade,  need 
III  raw  material-  and  IniildmL;  -iqiphe-.  ern^ineeriii-,  linance.  edii- 
caiinii.  -cieiitnic  and  mdn-trial  re-earch,  l.ilmr  and  empl-\ment, 
ii-n-in-.  nali-nal  re,i.;i-tratiMn,  t'ncd-,  an  I'mpire  Settlement  l/i-m- 
iii'ilee  ,ind  c:\  il  aerial  tran-p.  .ri,  it  i-e\'dent  that  <  ireat  Urilain 
iImc-  n.  1  pr.  p.-e  t^.  he  a!i\  le--  i  l'  a  t'aci.T  m  \\.  tM  alYair-  th.m 
.'-he  ha-  keen.  I  ler  vii'wiiuint  i-  w.  rldwi.le.  and  het'^  re  the  end 
It  the  war  i-  in  -ii,du  her  -tate-men  are  ki.  ikiiii;  p.  >  the  I'utnrc  ill 
a  detimte  and  tar  -i^hted  uaw 

\\     W     Su,in-..n      y/;,-  /  ii;,ji,v;,;,'  /'.-zivr  rf  ike  Ei'itirc.  p.  -1 
■official  iUii. .■■>':.   M.irch    H.   l'il>-. 


.scANNi\(i   I  Hi;  niiKi: 


li'l 


Lk.-^oNS  111     l'..\(;i,i- 


H    r.M'i.Kii  \i  i: 


.Ui'll^Il 


iVrliap.  t!u-  tlr<t  -rcat  lesson  of  the  war  a>  iu,l;;ol  hs   I-.uk 
cxpiTic'iUT  i.  OMi-aino!   m   tlu-  niatter  ..f    tact    ^tatcnK'ni    n?  the 

I.rcco.liiii;  pat-auraph.      It  ,,  „.„„■  to, „  t,,  l,„,k  ,,,  ,i„.  ^„„,,, 

It  i.aln-a^:>  apparm!  that  th^-  L-iiitoI  Staic^  ,nn^!  la\  A^■^^u  hp-a.l 
pniK-ipk's  f,,r  tho  le.iiislali.ai  aii.i  p^  hrv  ,  ,„  lal.T  ,|nt^ti.^i,.        Ihr 
icclmu  Mf  unr.^t  al.rMa,!   ,,  apparent   hctv.      Tin-  lain,,-  prMl,U,n 
nm.-t  l.f  >..Ivn!  tnana  nati^.nal  p.  ;nt  ,|  view.      (,rrat  a~  ha^  htvn 
the  oiiitril.utn.n  ..i"  p„I,lir  ohivati. .,  u,  tlie  v,.n  ,t  iio.N  rvur-aiii- 
Aaif.n   an.!   fea.liu-t.nent   v.   nati-nal   Ii;c.      In   a.hhtMti   ar."  the 
nianv  ^^w-.Uuu^  ,.i  „,„„l  ,,„,!  tnatt-nal  cnn>ervati..n  that  al^o  nni^t 
I'f  l-.kc<l  at  a^  nat,.,nal  <pK-.tiM„,  i„-tea,l  ..f  matter.  ,,t  private 
o.ncern.      Specit"ical!', ,  the  ^tudy  ,.i  the  fnianeial  M-le  .<{  the  Imi- 
ii.^li  '-verninent'>artivitie>.lnrni^  the  war  mark-  >,  :nie  thui-s  as 
<h>tinetlv  clear.      The  fir^t  .t   then-  i^  th.e  nece.-Miv   inr  an  ade- 
'|>';''--  .'",1  earetullv    o^nH.lere.l   -. -lein  ,,•  taxati..,  at  the  l,e-,„- 
"  =  >>i;  -t    the   war.  ;;ra,h,ali^    expandin;;   ni   it^  re^uhant    ino.ni.-- 
•^a-.-,),!.   a   o.n^.Ment   an,l   th.  .p -n^^h-:,,  .n^   -v^teni   ,„    h,,n-,.untu 
ha^e.l   ..n   i.nnciple.  .  !    .,,,,,,,1   tinance  rather   than   np,  „,   the   ■  .p- 
1"  ■■tnni.n,  ,.f  the  n.,:n,ent:  thw  1.  Trea -urv  o.nm.i  over  ..eneral 
expen.hinres  c..,ple,I    unh   tli..r..uuh   an-iirni-  an.l  an  a"vi...rv 
''I'''''''   '"''   ''"■^■^'   «penditure>:    t-.nrth,    a    i.;ane,al    ntnu^ter 
^^H'-c  wh,,Ie  tnne  an,l  ahiiily  can  he  ^nen  t.  ■  llnaneial  pn.hleni,- 
hlih.  a  .systematic  campaign   t'^.r  nat,M,,al  eo  „„  ,„n    and   savni- ■ 
sixth,  a  .hreci  .government  c  mtr,  ■!  ,  ,ver  manniactnre  ,.,"  nnuntion, 
and  the  transp,. nation  ,  „■  tlu-m  !,y  rail  and  dnp;  seventh,  the  hm,- 
tation  ,,t  extras a-ant  expenditnre  hv  taxati..,  ,,f  l.nth  pnrcha^-r 
and  dealer,  ,an,l  ei-hth.  the  c.stahlidmicnt  .-i  a  sv^tem  of  rati.  .,:in- 
at  an  earlv  date.  '"' 


